Day 1: No major panic barring a few lapses 3 lakh firms under lens for dubious transactions: PM
SWITCH OVER Businesses make changes in existing systems; analysts say technical glitches cannot be ruled out
though the GST is finally a reality, the litmus test for the government and the GST Network begins now. Analysts and businesses said barring a few discrepancies especially related to billing, day one was “more or less” seamless and saw no panic.
At the time of billing, a restaurant in Pune included both integrated GST (IGST) and state GST in one. IGST is a mechanism to monitor the inter-state transfer of goods and services.
While the customer did not have to pay more, but instead of IGST the restaurant should have included central GST. “This is a procedural lapse and there is no revenue loss to the government and the customer also has not been overcharged... this is because of lack of awareness and we have sought time until March 31 to exclude any penal action on such lapses,” said Praveen Khandelwal, secretary general, Confederation of All India Traders.
While businesses have made changes in their existing Enterprise Resource Planning (ERP) systems, technical problems cannot be ruled out, analysts said. ERP players such as SAP and Oracle have incorporated the GST compliance requirements within the internal systems of businesses, making updating of records necessary to avoid the procedural problems.
“The industry would expect the government to make announcements on procedural relaxations in terms of the initial teething problems,” said Suresh Nandlal Rohira, partner, Grant Thornton India .
Pressure on logistics will increase as the demand for fresh stocks is likely to surge in a few days. Many companies slowed down their procurements in a bid to clear their existing inventories.
Consulting firm KPMG, in its report, said as “distributors have slowed down procurements in the run-up to GST, some sectors are expecting massive surge in demand in the first week of July.”
“Procurement of goods had slowed down in the last two weeks but demand will increase once the new tax structure is in place, arranging for transportation will top the agenda of many companies,” Waman Parkhi, partner, indirect tax, KPMG, told Hindustan Times.
“Many have decided to buy time before going in for fresh inventories,”said former ICAI President K Raghu.
Former ICAI President K Raghu said that several retailers including chemists have decided to adopt a wait and watch policy before procuring new stocks.
“Many have decided to buy time before going in for fresh inventories,” Raghu said.
However, GST Network chief Navin Kumar assured a smooth switch to the new system.
Minister Narendra Modi on Saturday said the government has identified over 3 lakh companies for indulging in dubious transactions after last year’s demonetisation drive.
An additional 37,000 plus shell companies involved in converting black money into white have also been traced, he said.
Hailing the note ban as a move against black money and corruption, he said data mining process to scan the record of money deposited after demonetisation was under way and promised action against defaulters with out thinking about its political implication. “Initial probe has put three lakh companies under scanner,” Modi said at an event of chartered accountants.
“More revelations are expected,” he added. Modi also launched a course on Goods and Services Tax for the CAs, which came into force on Saturday.
Last year on November 8, the Modi government had recalled currency notes of ~500 and ~1,000, a move that triggered a major upheaval in the Indian market, prompting negative impact on the economy.
While the government is yet to reveal the value of the high currency notes deposited in the banks, the revelation by the Prime Minister was an effort to silence those who questioned the note ban decision.
“While everyone was awaiting the fate of GST, the government in a stroke deregistered 1 lakh companies,” Modi said. “Those who have looted the poor, will have to return to them.”
The PM rued that a section of the CAs helped their clients in a wrong way after demonetisation and asked the Institute of Char- tered Accountants of India (ICAI), the apex body of CAs in India, to take action against them. “Someone must have helped these looting companies. It’s your duty to identity and punish them,” he said.
In the last 11 years, he said action has been taken against only 25 CAs. “Do you believe only 25 CAs have done something wrong in last 11 years?There are 1,400 cases pending against the CAs. Isn’t this a matter of concern?” Modi asked.
Modi also said CAs should take a pledge to bring people in the tax bracket rather than boasting about the number of clients they have saved from paying taxes. The Prime Minister said only 32 lakh Indians declare an income of ~10 lakh and above. “Can you believe that there are only 32 lakh people with an income above 10 lakh?” Modi asked.
Modi termed the roll out of the GST as historic decision that will usher in a transparent and corruption-free government. Reiterating his commitment to fight against black money and corruption, the Prime Minister said the 45% decline in deposits by Indians in Swiss bank last year was the outcome of the steps taken by his government. Surprisingly, the amount had risen sharply in 2013, Modi said, referring to a period when the Congress-led UPA regime was in power. A commotion broke out on the premises of Delhi’s Indira Gandhi indoor stadium when PM Narendra Modi was addressing the members of the Institute of Chartered Accountants of India and CA students on Saturday evening. The ruckus started after over 3,000 visitors with valid entry passes were denied entry to the stadium as it was packed to capacity. Following this, the visitors staged a protest against the police.
Sources said the police used force to disperse the crowd but senior police officers denied the claim saying the visitors left as it started raining. The seating capacity of the stadium was reduced after a revised security measure.