Skip to main content

GST Round-Table Organized by Business Standard on the 6th of September 2017, New Delhi

On the 6th of September, 2017, the Business Standard organized a round table to explore the 2 month old Goods and Services Tax (GST) post the initial euphoria . It’s aim was to determine the efficacy of GST’s roll-out and gain a glimmer as how industry has reacted to the most substantial reform in contemporary Indian indirect taxation. The panel selected to facilitate the discussion was collected from diverse fields including the upper echelons of bureaucracy, industry and professional sector experts while the audience was predominantly middle management, entrepreneurs and entrenched professionals; doctors, lawyers and the like.

The event commenced with a key note address from Hansmukh Adhia, a revenue secretary. Adhia, declared GST to be a success while issuing a warning to industry that any delay in registration would be strictly penalized. He went on to state that there existed 86 lakh registrations under the old system spread over excise, service tax and state VATs. As manufacturers registered under excise would necessarily engage in selling their products, if only to a wholesaler or distributor, there was a great deal of overlapping between Excise and State VAT tax bases. Factoring this would reduce the total number of registrants to around 72 lakh, out of which 11 lakh are at an intermediate stage of the migratory process, the rest having already enrolled. Towing the government's line in claiming that GST has effected an expansion in the tax base, Adhia qualified the figure by stating that a good portion of the above are merely firms seeking new registration in order to avoid difficulties of the migratory process.

He also remarked that some issues in relation to GST registration stemmed from the usage of inappropriate PAN in State VAT registration. As State VAT did not verify the registered PAN, there were many instances where a personal PAN belonging to a director, promoter or even an employee was registered instead of the number assigned to firm.

In the interactive session after the address, Adhia admitted that there were certain structural errors in the compliance mechanism especially in the chronology of filing the monthly returns. The month-wise returns of GST are as follows:

Due Date
Reason for Filing
10th of the next month
Show details of outward supplies made by business

Show details of outward supplies corrected or deleted by the recipient
15th of the next month
Show details of inward supplies received by business

Reconciliation of inward supplies received by business based on FORM GSTR-1 furnished by the supplier
20th of the next month
Monthly return (other than compounding taxpayer and ISD)

Most difficulties faced involve an inability to verify inward supplies (GSTR 2) until the supplier files the return concerning outward movement of goods and services. Hence one’s GSTR 2 cannot be validated until all of one’s suppliers file their respective GSTR 1. This, according to Adhia would be eventually rectified when different due dates are assigned to each monthly return.

When suggestions were asked of the audience to improve GST, Adhia losing patience with repeated pleas to delay the due date for payment of taxes, stated that the postponement of the deadline from the 5th to the last week of September was to alleviate server traffic and that industry must buckle and forsake the its habit of procrastinating till the very last date to file returns. This would not only reduce traffic on the last day but also give assesses the elbow-room needed to make corrections and qualifications. He ended his address claiming that all achievements come at a cost, not specifying who would bear the brunt, and that the need of the hour was for state and business to work together to enable GST’s success.

The Editor of the Business Standard, Shyam Majumdar, after thanking Adhia proceeded to initiate the panel discussion. The commissioner of the Central Board of Excise and Customs, Manish Kumar Sinha, a panelist, cautioned businesses from attempting to profiteer off a reduced tax incidence. He claimed that the government would soon notify the creation of a standing committee for implementation of the anti-profiteering clause and proceeded to explain the proposed framework for the monitoring and redressal mechanism. He went on to talk about the goals of GST in both the short and long run. While the former revolved around stabilizing the system, the latter was aimed at reducing the number of tax slabs over a period of 2 to 3 years and bringing within the scope of GST, items that are currently excluded; petroleum, alcohol, etc. The exclusion of such, especially when they are used as productive inputs, creates problems in claiming credit for input taxes paid which would eventually lead to cascading of taxes and the resultant price inflation. When asked whether the delay in tax slab rationalization was politically motivated to defer the inflationary after effects of GST implementation to the post 2019 Lok Sabha election period, Sinha in well-heeled bureaucratic fashion, categorically denied any such motivation glossing over the Prime Minister’s obstinate and vociferous opposition to GST when he was chief minister of Gujarat. He proceeded to claim that the deferral was purely to ease industry into the new taxation regime and that GST’s implementation coincided with an inflationary sweet-spot caused by crashing oil prices, as if that were the overarching aim of 17 year long development time-line.

Pepsico’s CFO, Rajdeep Dattagupta, the panel’s industrial representative, when asked to describe Pepsi’s GST transition, described the process as a smooth experience. He stated that by reaching out to professional expertise, conducting internal training, understanding the supply chain and interacting with its constituents, PepsiCo faced GST with a level of informed preparedness. When asked by Majumdar whether small businesses would be able to adopt such an approach, hinting that Pepsico’s vast resources and apex position in its supply chain were crucial to its smooth transition, Dattagupata replied “It is not necessary that if you are bigger, you are faster. There have been smaller companies which are very well informed and well prepared.” He also added, glossing over the fact that GST took 17 years to develop and implement, that many firms doubted whether GST would be implemented and hence did plan ahead.

The panel discussion then moved onto the Goods and Services Tax Network. GSTN is the online data base for facilitating and monitoring compliance, allocating revenue between centre and states and ensuring ease in transfer of credit. Panelists representing GSTN were its former chairman, the current CEO and the CEO of National Securities Depository Limited (e-Governance). As data security is a major concern for businesses, Gagan Rai, NSDL’s CEO, informed and ensured that all data coming to the NSDL is encrypted and that in-spite encountering nearly 450 cyber attacks on daily basis apparently from China and Pakistan, data theft has been successfully prevented. If one were to take Rai at his word, side stepping the nationalist undertones, concerning the sources of these threats then the efficacy of NSDL’s security measures merit looking into.

On 10 October, 2016, it was reported that the website of the NSDL had been hacked. A detailed inquiry by SEBI into the attack on India’s biggest depository revealed that NSDL had not been fully compliant with SEBI’s policies and that several specific circulars on audit and risk containment were ignored. In fact, even the recovery effort did not meet SEBI’s requirements. Chinese hackers, in particular, have been rather successfully having stolen personnel data of 21 million US citizens including social security numbers from security clearance forms of government workers and job applicants. NSDL has huge responsibility to protect data entrusted to it but its track record is not one that inspires trust leading to questions concerning its capacity to confront such a challenge.

The discussion wound up with Sinha lauding the benefits of GST, highlighting in particular the near 30% saving in logistics cost from the abolition of state check posts and the introduction of the e-way bill.

Overall, the round table was a rather disappointing experience. In spite of having access to a diverse panel from a variety of sectors, the audience’s interaction seemed unable to transcend the nitty-gritties of running a business under GST. Questions constantly revolved around how a particular return should be filed, the applicability of a due date, whether interest or penalty can be waived, etc., with some even stooping to the level of questioning the logic behind the exempting meat from tax while levying a 5% charge on butter and ghee (it is based on the extent of processing). The absence of academia and non-professional sectoral experts, in both the audience and panel, severely limited the dialogue which very rarely delved in to theoretical or conceptual areas. Pronouncements by panelists, especially those representing government, were met with mute acceptance sans a murmur of protest. The lack of representation for small business or consumer groups resulted in key questions not being raised; how GST impacts the SMEs and end consumers, those who are most likely at risk from GST’s implementation. But one thing is certain, as evidenced by the Pepsico CFO’s comments, GST is definitely advantageous for big business. Whether that is beneficial for the Indian economy as a whole or the Indian consumer remains up for question. 


Popular posts from this blog

GST – Impact on Small Industry and the Informal Sector

The Goods and Services Tax (GST), that came into effect on 1st July, 2017, has been lauded as the most comprehensive contemporary reform of Indian indirect taxation. Aimed at creating a common, unified and integrated domestic market, allowing the free flow of goods and services across state lines, GST is supposed to deliver Indian industry and thereby the economy the competitive edge apparently lacking till now.
Reality is however a far cry from the picture painted by government. GST by creating platform a conducive to economies of scale and nullifying regional tariffs, is both conceptually and practically advantageous to big business and detrimental to the informal sector and small businesses.
These groupings, informal and small, though quite different have some degree of overlap. Informal business is overwhelmingly small but not all small businesses are informal. GST’s impact on these groups is quite different both with regard to extent of impact or in terms of results sought.
Small Bu…

Debt versus Equity Financing. Why the Difference matters?

There is a lot of confusion between debt and equity financing, though there is a clear line of demarcation as such. Whats even more sorry as a state of affair is these jargons being used pretty platitudinously, and this post tries to recover from any such usage now bordering on the colloquial, especially on the activists’s side of the camp. What is Debt Financing? Debt financing is a means of raising funds to generate working capital that is used to pay for projects or endeavors that the issuer of the debt wishes to undertake. The issuer may choose to issue bonds, promissory notes or other debt instruments as a means of financing the debt associated with the project. In return for purchasing the notes or bonds, the investor is provided with some type of return above and beyond the original amount of purchase. Debt financing is very different from equity financing. With equity financing, revenue is generated by issuing shares of stock at a public offering. The shares remain active from th…

Data Governance, FinTech, #Blockchain and Audits

Data Governance and Audit Trail Data Governance specifies the framework for decision rights and accountabilities encouraging desirable behavior in data usage Main aim of Data Governance is to ensure that data asset are overseen in a cohesive and consistent enterprise-wide manner Why is there a need for Data governance?  Evolving regulatory mechanisms and requirements Could integrity of data be trusted? Centralized versus decentralized documentation as regards use, hermeneutics and meaning of data Multiplicity of data silos with exponentially rising data Architecture Information Owner: approving power towards internal + external data transfers + business plans prioritizing data integrity and data governance Data steward: create/maintain/define data access, data mapping and data aggregation rules Application steward: maintain application inventory, validating testing of outbound data and assist master data management Analytics steward: maintain a solutions inventory, reduce redundant solu…