Indirect tax Budget 2020: What India Inc expects on Ease of doing business
Goods and services tax (GST) was implemented as an enabler of "ease of doing of business" in India, thereby improving India's competitiveness in global markets. In continuation with said theme, GST Council has been making constant changes to improve the procedural aspects and it is expected that Government would announce further changes/ clarifications in law, via Budget 2020. After almost 2.5 years since introduction of GST, stability and ease of compliance is the most prized expectation from the industry at this stage.
In the past, many glitches arose in return filing system of GSTN especially owing to rush towards the last days of filing of returns as a result of which trade and industry had to face a lot of administrative inconvenience. With the aim of de-stressing the Portal and aid the filing process, recent proposal of staggered State wise due dates for filling returns is a welcome move. One would hope that this process would help industry in managing their filings more efficiently with minimal glitches and ensure seamless compliance.
Now, GST is set to witness rollout of two mammoth processes in April 2020 -a new return system and e-invoicing. On execution of these processes, the government must be mindful that any change, however minute, is associated with a significant element of costs - in IT upgradation, ERP customisation and human resource allocation. For example, recent downgradation of input tax credit allowance to 10% on unmatched credit from 20%. Such stop-gap changes call for significant rework from a system's configuration standpoint, besides throwing up disruptions for business in general. For further improving the performance of GSTN filing portal on permanent basis, several technological measures should be worked out well in advance before April 2020. Therefore, rather than rushing up on such significant reforms just to meet it's own deadlines, industry would be expecting that Government provides a clear roadmap on progress and readiness of the new system and if needed, inform well in advance the implementation timeline after proper testing in pilot phase.
It is expected that some announcements may be made towards consolidation of GST rate slabs and further rationalization of GST rate structure. While the government has been allowing changes in GST rates on different goods/ products on case to case basis over last 2.5 years, any such changes should be done carefully only after considering the overall need, its historical rate structure from erstwhile regime and future revenue loss, if any. Rather, the industry's expectation is that Government should focus making GST regime more inclusive which would help in bringing parity and allow seamless passage to tax credits in order to bring down the overall costs, in line with overall spirit of GST.
Two core elements for ease of doing business are efficient tax administration and efficient tax dispute resolution in any taxation ecosystem. The government is proactively working to embrace a progressive era of tax policies and robust dispute resolution machinery. While the introduction of Sabka Vishwas (Legacy Dispute resolution) Scheme, 2019 (LDRS scheme) was a huge success, however, LDRS had inherent limitations such as, it did not provide clarity or respite in certain situations such as where multiple issues were involved and the assessee wanted to settle the dispute partially. It was not clear whether in case of multiple show-cause notices, whether a single application would suffice or a separate application for each show-cause notice would have to be made discretely, etc. Despite these issues, given the last minute success of the scheme, government may consider re-introducing the scheme with proper resolution to such inherent limitations/ ambiguities and also widen the coverage of pending litigations. Such scheme, if implemented again, may also be extended to disputes/ matters pending under Customs legislations. This would certainly go a long way in encouraging more assessees to close long pending litigations as also help Government augment revenue.
On Customs front, since a major portion of global trade is carried out by related parties, 'special' care needs to be taken for such transactions. Unfortunately, the Special Valuation Branch (SVB) is beset with a large backlog of cases and provisional assessments appear to be pending finality for long period of time. This can only be resolved through greater staffing and rigorous administration. Further, industry wants that requirement of Extra Duty Deposit (EDD) during proceedings should be dispensed with entirely, where they have met with requisite submissions and prescribed valuation conditions in a time bound manner.
Lastly, in order to ease our common business processes and compliance procedures, trade, industry and professionals are expecting changes to be notified by Government, which were brought up vide Finance Act, 2019, such as levy of interest on amount payable through electronic cash ledger only, single cash ledger for each tax head, formation of single authority for disbursement of refunds, creation of a centralized Appellate Authority for Advance Ruling, etc.
The past year has been quite fiscally challenging for the government, an overall slowdown in the economy has been 'taxing' for the government and businesses alike-with falling revenue collections and leakages in tax collections, going in tandem with reduced business activity.
Budget 2020 will be decisive as a roadmap for recovery. While decisions on critical issues concerning GST are made through the GST Council, the Budget signals the government's intent. Addressing the pain points of GST could unleash a renewed vigor in businesses.
Authored by Krishan Arora- Partner (Indirect tax), Grant Thornton India LLP and Karan Kakkar- Director (Indirect tax), Grant Thornton India LLP