Is it the End of Office Stationery?
SEEKING A RELOOK Most tax experts feel a small tweak to the GST regulations can do away with this complexity Different tax rates and codes for most items forcing cos to stop or cut down on office supplies
Mumbai: If you aren’t getting your company-branded writing pads or pens, blame the scarcity on the Goods and Services Tax (GST).
For tax advisors and in-house finance teams, dealing with vendors that supply pens, writing pads, pencils, staplers, and printing paper-rolls has turned out to be a major challenge after the national rollout of the single producer levy.
Tax rates and codes for most stationery items are now different. Companies cannot just enter a combined cost of stationery, but will have to compare codes of each item and enter them separately for raising invoices.
Due to this, several companies have decided they would stop or reduce the amount of stationery provided to employees, while a few others are looking to not take credit for these purchases. For major companies with large and distributed operations, not availing input credits would be costly, with such expenses running into several crores of rupees every year.
“On items such as stationery purchased from unregistered vendors, businesses are liable to pay GST under reverse charge. For this, they need to do self-invoicing and determine HSN code for each item purchased,” said Pratik Jain, National Leader, Indirect Tax at PwC India. Most Indian companies, including some of the country’s biggest, buy their stationery from unregistered and small players. In this case, all the companies would have to draw up something called self-invoicing for GST.
This also means that companies would have to use their resources to put the code online for each and every item bought during the month.
Even where registered suppliers are involved, in-house finance teams would be required to go through each and every vendor entry. Com- The Road Ahead panies will have to check whether the adjacent code for each item is correct as not doing so may create some accounting complications in the future, say experts. Finance heads at many companies say that dealing with stationery is one of the problems that shouldn’t have been there in the first place.
“Can you imagine that for the last two days, four of my finance colleagues and some tax experts we have hired are only keying in codes for stationery items!” said the CFO of an automobile company. “Dual HSN codes have been published for pencil sharpeners, staples, paper or paperboard and other simi- lar items under GST. These have to be entered separately in the systems to avail of accurate tax credits… Worldwide, the input credit system is far simpler and less onerous. One standard rate is the norm internationally,” said Vaibhav Manek, partner, KNAV.
Industry trackers say that some of the biggest manufacturers and suppliers of office stationeries are unbranded and smaller players. In most cases, these small players are more flexible with their supplies and work on thin margins, something that works well with buyers. Many tax experts say that a small tweak in the GST regulations can do away with this complexity.
“While an exemption of .₹ 5,000 has been provided, it is leading to significant compliance burden for businesses. Since in most cases, it would be a revenue neutral exercise, the government should relook at this provision,” said Jain of PwC. Many companies may now only deal with organised stationery sellers to reduce complications. Most stationery players may continue to remain unregistered as they may show that their turnover is less than .₹ 20 lakh – the threshold for GST exemption.