The GST Council meeting on the 7th of October in Hyderabad has brought some relief to struggling tax payers, particularly in the bleeding informal sector of the economy. Much went wrong in the initial stages of implementation of this path breaking statute.
Problems with the GST
- The new tax regime was set to roll in the middle of the financial year causing disruptions to budgetary planning and allocations.
- The GST tax rates on several common use items, such as steel rods used in construction – a basic activity of an aspiring economy, was fixed at 28% (the highest tax slab). Restaurants, too, pay taxes in the range of 12% and 28%.
- The reverse charge mechanism necessarily restricted transactions only with GST registered agents rendering a complete class of low income suppliers and vendors unable to earn or feed. The unorganized sector is the sole bulwark of rural society in India providing employment to 95% of the country’s population (Employment and Unemployment report of the NSSO).
- Small and medium enterprises, too, have struggled to come to grips with the nature and frequency of efiling of tax returns on incomes or transactions made under the GST. With filing of GSTR-1, GSTR-2 and GSTR-3 once every month apart from an annual tax return, the number of returns amounts to 37 in a year. If a business acts as an Input Service Distributor or as an assessee of TDS, then you will need to file an additional 24 returns in the same fiscal year.
- To add to all of these complications, the GSTN website periodically suffered breakdowns and delays resulting in more chaos and confusion.