The Pain Behind Rs 92,283 Crore GST Collection

The Rs 92,283 crore Goods and Services Tax collected for the first month does not tell the full story – neither quantitatively, nor qualitatively.

Quantitatively, the number should get the benefit of circumstances, MS Mani, an indirect tax partner at Deloitte India, told BloombergQuint. That’s because, he said, July is typically a dull month for businesses in India.

It is considered to be a month where people don’t make purchases because of religious reasons. So, if in July, as the finance minister has said, we have crossed the red line on collections, the subsequent months are going to be excellent. 

MS Mani, Partner, Deloitte India

The Quantitative Picture

But this euphoria needs to be adjusted for credits.

When it comes to indirect taxes, no number for any month is an absolute number for at least the next 15 months, Mani explained.

Taxpayers are permitted to file revised returns. There is also the annual filing. Only when this happens can you say that the numbers are truly final. So, every month, there will be a true-up of the previous month.

MS Mani, Partner, Deloitte India

In isolation, this number may not give a true picture, Pratik Jain, an indirect tax partner at PwC India added. He pointed out that out of this Rs 92,283 crore, the Integrated GST from imports is Rs 20,964 crore.

Businesses would have paid this amount in July for imports which will be available as credits when they, for instance, sell in August. A large part of this will be allowed as offset. A lot of companies could not claim opening credits lying in their books as of July 1 which needs to be factored as well.

Pratik Jain, Partner, PwC

But the true-up, Mani said, will also happen on the credit side. Since only 65 percent of taxpayers have paid GST, the remaining amount may come in the subsequent months with interest. “This number can go upwards because of the tax payment,” he added.

The Qualitative Picture

Numbers aside, it’s the experience story that was more painful, experts BloombergQuint spoke with said. They categorised it into three broad categories:

  • Absence of offline utility for form TRAN 1 used to avail credit for taxes paid before the GST rollout.
  • Inability to transfer internal balances in electronic cash ledger.
  • Failure to authenticate digital signatures.

TRAN 1 TRAUMA!

Taxpayers who intend to carry forward transitional credits – from the pre-GST regime – can file form TRAN 1 till September 28.

But those who intended to use the transitional credits to offset their tax liability in July had to fill this form by August 28. To fill out this form, the Goods and Services Tax Network had promised an offline utility tool. But the GSTN failed to deliver on its promise.

TRAN-1 utility is not yet available and because of this, in certain cases like job work details, the taxpayers are forced to punch in details running in hundreds of line items, Jigar Doshi, an indirect tax partner at consulting firm SKP Group, said.

TRAN-1 was made available only on August 21 and it was not possible to submit the details in 6-7 days; particularly in cases where the closing credit is running in hundreds of crores. 

Jigar Doshi, Partner, SKP Group

Besides the lack of the offline tool, another aspect that continues to confound taxpayers about TRAN -1 is whether they can submit a revised TRAN-1 before September 28.

A few tweets from government handles suggest that TRAN-1 can be revised; however, there is no clarity on this, Doshi said.

Many clients have chosen to be conservative and not file TRAN-1 to claim a set-off against July’s tax liability, Jain added.

Cryptic Cash Ledger

An e-cash ledger works like a wallet for GST purposes. It reflects the amount deposited towards GST liability and debits made to pay tax, interest or penalty.

In the GSTN system, the cash ledger for all the laws – Central, State and Integrated GST – is maintained separately, Jain said. But there is no facility to transfer funds from one cash ledger to another, he added.

In case of inadvertent erroneous payment in one cash ledger instead of another, the taxpayer is again required to make payment in the correct tax ledger to discharge tax liability and the payment made originally needs to be carried forward, resulting in cash flow issues. In some cases, despite having balances in cash ledger of one tax, the tax needs to be paid if there is a liability in another tax. 

Pratik Jain, Partner, PwC

The balances in electronic cash ledger belong to the taxpayers and so, transfer of balances between different heads in electronic cash ledger should ideally be allowed, he added.

Besides this, multiple entries are shown in the electronic cash ledger and sometimes credits made available are more or even less than actually claimed in TRAN-1; obviously these are system errors, Doshi pointed out.

Digital Signature Delay

A seemingly simple but essential aspect of filing returns led to considerable delays. Under GST, all returns have to be signed electronically with a digital signature certificate (DSC).

Doshi pointed out that many of his clients were unable to attach DSC due to technical issues.

Jain said the DSC was not getting accepted for authentication of returns, despite being valid and functioning and it took multiple attempts to authenticate the returns by using DSC.

Another area of concern in the first set of filings was the inability to rectify errors in the summary returns. For the months of July and August, businesses have been allowed to file taxes on the basis of a simple return, Form GSTR-3B, consisting of a summary of outward and inward supplies.

Jain pointed out that the GSTN did not allow any rectification or modification in the return once it was submitted. In some cases, the tax liability of the assessees increased by crores of rupees, just due to inadvertent punching of an extra digit in the form, he added.

Much to the relief of assesses, the government has now addressed this concern and notified that changes in the summary returns can be made through GSTR-1 and GSTR-2.

In view of various challenges faced by businesses, the government should consider allowing more time to submit GSTR 1 due on September 5, Jain said.