SIBN seminar on GST sheds light on reform


WITH the implementation of Goods and Services Tax (GST) India has ushered in a new indirect tax for the whole nation. Though hailed as the biggest tax reform since independence, there were many queries and complexities in regard to GST as well. In order to clarify the doubts the Consulate General of India, in association with Saudi Indian Business Network and team, recently organized a discussion session on GST.

The conference brought together experts and leaders who shared relevant developments as well as delivered solutions to the challenges faced by individuals and industries post GST. Given that from 2018 VAT will be applicable in all GCC countries, the session was timely. Dr. Nurul Hasan, consul commercial, welcomed the guest while explaining the long journey the reform has taken to its reality.

Indian Consul General Mohd. Noor Rahman Sheikh opened the seminar with a brief introduction of GST, which he stressed was being called Good and Simple Tax, even by Prime Minister Narendra Modi while rolling it out. He highlighted the importance of the tax reform, saying it was much needed as it brought about a unified tax structure in the country. The reform has gone through a long journey but the best part is that it subsumes almost 500 indirect taxes of country to a single tax.

It was a challenge to bring all states on single forum and bring about a consensus in arriving at the GST bill, showing a true cooperative federalism. The seminar today is being held to understand how GST will be applied and how it will affect the common man and business and how it will prove beneficial to the people and the nation in the long run. That’s why the team have been assembled in the seminar to shed light on its wide scope, he added.

The team represented by CA Ashu Dalmia and Shaifaly Girdharwal provided an overview to GST and resolved queries from the audience. CA Prabhat Bhargava, of Microsoft India, presented the seven pillars of tax administration, which need to be followed to make business ERP system tax compliant.

One has to understand the law and data capturing, business process, its supply chain members, invoicing and voucher raising point and accounting issues, contractual obligations, compliance deadlines and supply chain member’s preparedness. Many complexities were explained in a much simpler form.

Experts highlighted that India has created a unique GST system to cater to its 1.3 billion population, with differing GST slabs (0% to 28% — seven slabs with certain exemptions) to match 3.5 billion invoices on a monthly basis, this will prove to be a Herculean task. Errors in online information submission by any of supply chain member could jeopardize the other supply chain member’s compliances. Challenges will also be posed from the multiple tax slabs and existence of exemptions, which creates room for huge amount of litigations and escape route to avoid tax.

The GST rates have been determined by the government keeping in mind tax neutrality i.e. govt. should get similar revenue as in past taxation. Social structure, tax affordability and varying demands from various stakeholders has led to multirate structure whereby 81% of the items have been kept within the 18% tax bracket.

There is, however, a major shift from source based taxation to consumption based taxation. Additional cess collected over luxury items will be used to compensate states, if there is any revenue loss compared to present.

“Multiplicity of taxes at the State and Central levels had resulted in a complex indirect tax structure in the country ridden with hidden costs for trade and industry. Firstly, there was no uniformity of tax rates and structure across states. Secondly, there was cascading of taxes due to ‘tax on tax’. No credit of excise duty and service tax paid at the stage of manufacture is available to the traders while paying the State level sales tax or VAT, and vice-versa. Further, no credit of State taxes paid in one State can be availed in other States. Hence, the prices of goods and services get artificially inflated to the extent of this ‘tax on tax’. Theoretically, with minimization of the cascading impact and reduced number of tax compliances, prices should come down,” Vijay Soni of SIBN, explained its simple working.

Experts said that though, initially, certain traders may not pass on benefit of the lower GST impact, the government has brought about an "anti-profiteering law" to see that GST benefits are being passed on to consumers.

Mid range suppliers (with turnover up to 7.5 million rupees) can opt for “Composition Scheme” with minimal formalities and limited tax payment. Small traders/suppliers (turnover up to 2 million rupees) may opt to be out of GST but looking at inter connecting seamless input/output credit transfers, it will force even small intermediary to get registered under GST. Only the last end of supply chain member with small turnover may find it worthy to be out of GSTN — Goods and Service Tax Network. Due to this most of the B2B transaction are expected to be covered by GSTN reducing off books trade.

The experts explained that, government expects revenue to achieve 3-4 multiples to current estimate over period of 3 to 4 years. This additional revenue will allow government to reduce number of slabs as well as GST rates and increased social welfare schemes. With this the present complexities may tend to be simplified as well.

One GST plus point that hasn’t received much publicity for is the knowledge it will create. With GST, most B2B transactions in the country will be recorded online. The enormous data thus generated will allow more accurate and timely information about the economy. This could be a revolution.

“It is a good and simple tax system as it replaces multiple taxes but complex as well due to inclusion of multiple slabs based on dual principal of item as well as its pricing, coupled with compliance need from all supply chain members” said Soni while rounding off the seminar.

The event was supported by Kris Jangal and IT wing of consulate, Amjad Sharief and colleagues. Soni compered the event with small workshop on GST working, while Gazanfar Zaki presented the vote of thanks.