Two weeks hence India will migrate to a one country one tax system. Indeed a historic move. Businesses have to migrate from having to pay multiple taxes such as value-added tax (VAT), service tax and central excise registration to a GST registration. The concept appears great. But it is not as simple as it looks. Its rollout in a country as diverse and huge as India shall be daunting. Public awareness aside, efforts to dovetail lakhs of business processes to GST platform will be a Herculean task.
The government may say anything it likes to back its claim but the switchover will not be smooth. The authorities got to help firms, especially those in the SME segment, with technologies required and help them with low cost processes. Possessing adequate knowledge to understand and use the systems in the post GST period is important. Rumblings have already begun to be heard. Political opposition aside, there are murmurs of protests from big firms against the precipitous manner in which the government has been trying to shove it through.
The pan-India tax is not a simple levy which you pay and forget. It will not only have different slabs for different types of goods and services, it won’t be similar countrywide. There is GST for Centre, SGST for states, IGST for interstate trade and so many other regulations that require no less than 49 returns a month. Centre will levy and administer CGST and IGST while respective states and UTs will levy and administer SGST/UTGST.
It is more of a daily chore for half a dozen accountants for any organisation of average size.
Out of 84 lakh entities in the country, 60.5 lakh have registered with the GST Network. The enrolment window, which had been suspended April 30, was reopened June 1 for 15 days. But it is only for those who have already registered under the GST portal. Fresh registrations are yet to begin.
Given the huge number of assessees and the plethora of details required to be furnished, switching to the new tax regime will not be a cakewalk. As it is, businesses are facing a slew of challenges, the most common being of integration and upgradation of existing IT infrastructure to make GST complaint.
GST will significantly increase the IT interface of businesses. While larger organisations may be better equipped to overcome the challenges, small and medium sized enterprises will struggle no end. Manual invoicing will be a thing of the past, while the completion of the migration process will be an additional task requiring new manpower and costs.
All data and accounts books will be maintained electronically which will be a tough task given that several small traders are not computer savvy. Traders will have to file returns three times a month as against once in every quarter. Local wholesale traders may find it difficult to maintain prices of all goods and their corresponding tax under GST on computers. Different taxes on products will also add to the confusion among traders and buyers alike.
Given the tectonic changes the GST envisions, it is plausible traders are demanding leniency for the first year of GST rollout vis-à-vis some errors in transactions or if they happen to fail to become GST-compliant. In the first few months maybe, small traders will feel the need for some time to understand GST in its entirety.
And the government should not grudge it. Maybe, it should launch a drive to educate small and marginal traders to acquaint them with the processes of GST. Else, the much vaunted tax will turn out to be an albatross around the necks of small and medium sized businesses.