Saturday, 15 April 2017

Some Thoughts Over New GST Acts Passed - Series 1

GST Act was passed in Lok Sabha on 22.3.17 and subsequently in Rajya Sabha and  got President’s assent.  Apart from this, the SGST has to pass through the series of steps for its passing by the majority of State Governments for it become Law and all the formalities shall have to be completed before 30th June 2017 to enter the new GST era. In the meantime, the Council has to decide on the threshold limits, exemptions etc.
          This is the third time an Bill is doing the rounds in the field, ( 1st one in May 2016, Second one Nov.2016 and now the one  passed  in Parliament in  March 17 ) sending the learned and the layman, pandit and pedestrian  into a maze, in all its avatars.  Every time it takes a new Avatar, it brings with it new changes in the form of knives wrapped in cotton gloves. Herein, I make some attempt to identify and highlight some of the knives, which would require a departure from the beaten Excise and Service Tax rules mandated and followed so far.


Though, it is stated that there is threshold exemption to small scale sector in goods and services, Government has devised a strategy or mechanism so as to make the small time tax payers to clearly opt out of the exemption carrot offered in the Statute book.

 Section 9(4) of the present Act says when the goods and services are received from unregistered players by the Registered persons, the Registered persons are liable to pay the GST on Reverse Charge basis.  Thus by this way, the Govt wants to ensure all the goods and services both supplied and received by the registered persons are GST suffered, thus bringing the GST cycle complete.  But what is lost sight is that it will serve as a disincentive for an unregistered person to supply the goods or services or both to the registered person.  Which Registered person will be ready to chase the unregistered supplier only to take the responsibility of paying the taxes on his behalf?

Think of a big industry purchasing provisions for canteen needs and stationery from small shops to meet its sundry needs.  Surely, they are likely miss out something, for which the Audit people will come with big lens to catch only to slap Tax and interest and penalty liability at a later date. We will surely live to witness such dramas in future.  Aache Dins aane walah hai!

Thus it is the other way of bringing all the people to fall in line. It is another game by the Government to show on book that there are threshold exemptions but in reality hurdles are put in place to frustrate the enjoyment of the same  it by the exemption aspirants. So the unregistered persons are to limit their transaction within the unregistered persons’circle.  However, the registered persons are to suffer in case they go in for purchase from unregistered sector.


If you think only the Registered persons are the only one to bear the cross on behalf of the unregistered persons, you are wrong.  We won’t spare unregistered persons easily either.  An unregistered person has to be very watchful to ensure that his supplies are always within the same state.  In case he makes any single supply to a person whether registered or not in another state, he is liable for paying IGST on forward basis.  Even for making for one supply you have to take out GST registration, file multiple returns, pay the taxes on due dates.  Consequences of failure to notice any such inter state supply will be a subject of different tragic story!  So small time players – beware you may continue to enjoy the exemption benefits with the Swords of Damocles hanging permanently over your heads.  


Under the GST era all Kalvi thanthais ( Fathers of Education -  an euphemism for Education hawkers )are  to come under tax net. As on date all education services other than ones of commercial nature are exempt.  In GST regime, the exemption is restricted only to education services by Government or local authority.  Govt authority means Board or any authority with 90% equity by Government.  This step, if I presume correct, is the right one to bring the illegal money into legal circulation.  Thus the unwritten/undeclared capitals received from the innocent persons will be subject to GST.  A great step, but with more pain to the education seekers.  But have heart, it will stop the accumulation of ill-gotten wealth which are the root causes for all the illegal activities we notice in the country. 
For the time being I take leave for this week.  Rest of them in subsequent posts.

Some Thoughts Over New GST Acts Passed - Series 1

GST Act was passed in Lok Sabha on 22.3.17 and subsequently in Rajya Sabha and   got President’s assent.   Apart from this, the SGST h...