Challenges Ahead

Business Today - - GST -

No ex­emp­tions:

At present, the thresh­old for VAT reg­is­tra­tion is ` 20 lakh turnover; for ex­cise duty, it is ` 1.5 crore turnover; and for ser­vice tax, it is ` 10 lakh turnover. These will not be avail­able un­der GST – the thresh­old for ex­emp­tion is ` 10 lakh for north-east and ` 20 lakh for other states.

Au­dit­ing of ac­counts:

Bud­get 2016/17 in­creased the turnover thresh­old for cal­cu­lat­ing pre­sump­tive tax from ` 1.5 crore to ` 2 crore. A per­son adopt­ing the pre­sump­tive tax­a­tion scheme can de­clare in­come at a pre­scribed rate and, in turn, is re­lieved from the te­dious job of main­tain­ing books of ac­count. This ben­e­fit may go away. The GST law makes it manda­tory for MSMEs to get their ac­counts au­dited.

Spike in com­pli­ance cost:

Un­der GST, each en­tity will have to file three monthly re­turns and an an­nual re­turn. In all, an as­sessee op­er­at­ing from one state will have to file 37 re­turns in a year. If the op­er­a­tions are from mul­ti­ple lo­ca­tions, the com­pli­ance bur­den will grow im­mensely. Be­sides, they will have to up­load every in­voice raised on the GSTN plat­form.

Get­ting IT- en­abled:

Re­turns will have to be filed on­line. Many MSMEs are used to fil­ing man­ual re­turns. MSMEs will have to up­grade their IT in­fra­struc­ture and spend on en­ter­prise re­source plan­ning (ERP) and other soft­ware.

Cash flow prob­lems:

In­put credit will not be avail­able un­less all the en­ti­ties in­volved in the sup­ply chain have paid their taxes. Be­sides, all the taxes paid have to be matched cor­rectly. Any non-com­pli­ance or er­ror can de­lay the re­fund, cre­at­ing cash flow prob­lems.

Loss of busi­ness for non- com­pli­ance:

Un­der the GST regime, a buyer shall not be en­ti­tled to claim in­put tax credit un­less the tax charged in re­spect of such sup­ply has been paid by the seller as well. Apart from this, rat­ings will be as­signed to each reg­is­tered en­tity based on com­pli­ance. Big busi­nesses would like to work with sup­pli­ers or ven­dors with a good com­pli­ance record. This could mean loss of busi­ness for many smaller play­ers strug­gling to com­ply with GST rules.

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