Migration to new tax regime in slow lane

Just 35 per cent of exclusive central excise taxpayers have migrated to the goods and services tax (GST) regime despite a significant lowering of the exemption threshold.

According to the latest data provided by the GST Network, or GSTN, the information technology backbone, of the 43,854 central excise taxpayers, 15,786 have migrated to the new indirect tax regime. The numbers have baffled experts because while the earlier exemption was up to a ~1.5-crore annual turnover, it has been significantly cut to ~20 lakh under the GST.

The window for registration, however, is open up to September 30. This could also be on account of entities no longer carrying on business, hence filing no return or nil return. They may have chosen not to migrate. “The data are very surprising. Ideally they should have migrated even though the window is available for another two months. There could be issues with respect to back-end verification, or lack of understanding of the law,” said Saloni Roy of Deloitte. She added that it could also be due to entities finding it difficult to apply for migration on the GSTN portal, and then opting for fresh registration.

The story is not different for the service tax, where only about 60 per cent of the exclusive service taxpayers have migrated to the GST. According to the latest data, of the 1.08 million service taxpayers, only 600,000 have registered for the GST. Although the exemption limit under the service tax has been doubled to ~20 lakh under the GST from ~10 lakh, tax experts argue the numbers should have been higher due to the availability of input tax credit even for services under the GST.