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GST confusion could hit India’s quest to improve ease of doing business ranking

With a ranking of 130 out of 190 countries, India is still adrift of its target to be among the top 50 countries in relation to the ease of doing business.

india Updated: Sep 23, 2017 21:31 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times, Nw Delhi
GST,Tax rates,Ease of doing business index
The uncertainty over tax rates and the problems faced by the businesses in filing returns could impact India’s ambition of climbing up on the ease of doing business index.(AFP File Photo)

The confusion and frequent alteration of tax rates of products under the goods and services tax (GST) may dent India’s hopes of improving its ranking on the ease of doing business index brought out by the International Finance Corporation.

Despite the government’s continuous reform process, India was placed at 130 among 190 countries last year, just one notch above the previous year’s ranking.

One of the major thrust areas of the NDA government was focus on ease of doing business in the country to improve its ranking. The government had aimed to be among the top 50 countries in relation to the ease of doing business. But that hasn’t happened so far.

“GST was meant to create one nation, one tax but the existing uncertainty over tax rates and the problems faced by the businesses in filing returns will have a direct impact on the ease of doing business index.GST was meant to make things more seamless,” Soumya Kanti Ghosh, chief economic adviser of the State Bank of India group told Hindustan Times.

A KPMG report said that the industry has to go through the cycle of re-fixing final consumer prices if GST rates are revised within two months of its launch. Besides, businesses that are affected would have to communicate the changes through the supply chain and revise consumer demand projections and realign discounts and marketing policies. “Making changes so often also gives an impression of uncertainty in doing business in India, which had always been a complaint of global businesses,” the report said.

Read more: Centre eyes cuts in spending as glitches in GST hit revenue

“There is confusion over not only over GST rates but also the portal (where businesses need to file their sales records) has not been working and it is unable to take the load, which is creating more problems for the industry and these need to be addressed at the earliest,” Waman Parkhi, partner, indirect tax, KPMG said.

The gross mismanagement has hit the medium and small traders the most, as most of the business operations are done by them in house and they have no advisors to guide them through the crisis.

“GST implementation in the country has turned out to be a nightmare coupled with great hustle and bustle for the traders who are bound to follow different compliance formalities under the new tax structure,” the Confederation of All India Traders (CAIT) said in a statement.

Earlier this month, finance minister Arun Jaitley said Rs 95,000 crore was collected for the month of July under the new tax structure which translates to 64% compliance. Sources said that claims of over Rs 1 crore would be checked by the tax department to ensure that there was no discrepancy.

The Central Board of Excise and Customs CBEC has asked its officials to verify all transitional credit claims for more than Rs 1 crore as it does not rule out ineligible claims “due to mistake or confusion”.

First Published: Sep 23, 2017 21:31 IST