By Ramesh Chandra Roy
The advent of the Goods and Services Tax (GST) on the taxation horizon of India brought in historic changes and quite a lot of heat, not only in commercial sectors but in political arena too. Never before in India history has any indirect taxation measure evoked such intense reactions- from vegetable vendors to diamond exporters and financial wizards to airline executives, all with equal passion.
The intensity of the discussions over GST has not faded even after more than a year since it was rolled out. Such discussions can be witnessed even today, in street corners, railways bogeys and corporate board-rooms, which speak volumes about its all-encompassing coverage and the manner it has impacted the common masses, cutting across social and economic sections.
In addition to the benefits cited in the preamble of the law – like the avoidance of cascading effects of previous laws and the intended ease of business with a single law instead of the multiple acts, rules and regulations followed earlier – GST has brought along the concept of a need for financial discipline that can no longer be ignored nor avoided.
For one, the cost of non-compliance is much higher in the new framework. Forget about the part of profit, it even puts the viability of business at stake if enforcement department takes the stand of presumption as to willful miss-statement or suppression of facts on the part of the tax assessee, as enumerated under Section 74 of the Act. Penal provisions are activated even in cases of mistakes, which are attributed towards non-compliance with law on the part of the assessee. Even worse, ‘ignorantia juris non-excusat’ (ignorance of law excuses no one) would be operative on the assessee, facing the wrong side of the law. With such a rigid stance on compliance, it has made it imperative for all assessees within the taxation net to comply with the new rules with its intended requirement.
What this also means is that the GST, being a legal subject, needs to be interpreted in its strictest legal sense only. Any interpretation based on perceived ‘common sense’ or ‘general understanding’ can lead to serious implications for the business. Like medical advice from quacks, advice taken from professionally unqualified or under-qualified persons has the potential to wreck havoc for any business entity.
Monetary values are attached with compliances of provisions under the Act and as opposed to direct taxation, much is at stake in case of indirect taxation, whereby penalty for short payment is stringent and can be levied up to the extent of 100% of tax short or not paid, either due to fraud, willful miss-statement and suppression of fact and in case of excess payments or refunds arising from there, it is obligation of the assessee to prove that the burden of tax has not been passed over to the customers due to the operative clause of unjust enrichment. In these circumstances, not only is the correct and timely deposit of tax is of vital importance, but correct computation of eligible and ineligible tax credits also become equally significant for correct compliance of legal requirements.
To cite an example, much businesses has been lost due to non-availing of benefits bestowed under the law for stock-in-hand on the appointed day, 01.07.17 (when GST was enacted), under transitional provisions of the Act and its Sections 140 and 141.
In the course of development, enacted laws unfold many benefits for the NE Govts and in the case of GST, it is in terms of increased revenue generated due to consumption of goods and services. Govt’s continuous endeavor to integrate different sources of information to an unified framework would soon start yielding results and the identification of willful defaulters and non-filers of taxation requirements would no longer be a subject matter of chance; their detection and compliance enforcement mechanism would be automated to a large extent. This, in turn, will ensure greater share of revenue collection.
Under the GST, the law provides for a destination-based taxation mechanism and hence every supply of taxable good or service, which can be correlated with consumption within the State, would generate revenue for it. So to say, even the TV advertisements broadcasted within the state and Internet advertisements popping up on the screens of laptops and other devices are generating and adding to the revenue for the state. The law has even provided for loss of revenue to the states during the initial five years of implementation, if any loss is attributable to the enactment of the Act. The only requirement for the states concerned is to be constantly vigilant on their share of revenue accruing or arising either on account of inter-state or intra-state supplies consumed within their respective territories.
GST and local entrepreneurs: The GST laws have been framed so meticulously that continuing to trade, manufacture or provision of services without keeping correct records could expose any business towards untold perils of penal provisions enumerated under the law. Business and commercial organizations cannot afford to continue to treat accounting and internal financial controls as a luxury instead of recognizing it as a necessity and as an integral part of business activity.
In the debate on impact of GST on industry and small businesses, what has been less recognized is that these new requirements have the potential to bring in visible long-term changes in the business environment. This is true particularly of the northeast region, where entrepreneurs could start deriving benefits of proper accounting control by way of significant reduction in wasteful expenditure and by plugging loopholes of financial leakages. In recent times, there have been several cases where business entities were cheated of considerable sums of money due to wrongly placed blind trust on managers and in-charges of the concerns, without any cross-checking mechanism and accounting control in place.
Better accounting and control mechanism would infuse greater confidence among the bankers to extend much needed credit facilities within the region for continuing as well as upcoming commercial activities.
The timely recognition of the new laws, a better understanding of their implications and the implementation of systemized business practices would enable them to take better financial and business decisions rather than those based on conjectures and ill-equipped advices.
GST and career options: The additional and unavoidable requirement of GST provisions has also brought a new opportunity for career aspirants, though almost veiled. With the given need for proper accounting and financial monitoring within businesses, this law has opened huge job and career opportunities among the local youth.
With proper training and correct orientation, young people can now cater to the continuous accounting and book-keeping needs of the business community, not only for correct compliance of the GST laws, but also to assist them in taking timely and studied business decisions, thereby making themselves an integral part of the growth journey of the institution. The NE, like other Indian regions, is bound to witness a spurt in demand of expert accountants and with the right openings, this can well turn out to be one of the most viable and long term career alternatives for the youth. Well trained professionals with the right aptitude for this kind of work would find themselves in high demand with lucrative job offers, not only confined within the State but outside as well.
The state and central Govt’s initiatives in skill development needs to recognize this demand for the new skill set and dovetail its programmes also to include accounting and book-keeping as key sectors of skill development.
With all its provisions of tax generation and systemized monitoring, and the opportunities that it offers in terms of ease of business and employment generation, the GST with its varied political and public interpretations as well as reactions, really needs to be viewed with the practical understanding as a continuing requirement and the outcome of a reform in the existing systems.
With its obvious and not so obvious benefits, there needs to emerge a mental orientation that the GST law, as enacted, is going to exist and be an overarching and unavoidable part of the business environment. What therefore becomes critical is how we engage with it and how we equip ourselves with its nuances in order that the benefits of the provisions accrue not just to state Govts as revenue, but also to businesses and industry as a new way of doing effective business. (The writer is prominent fellow chartered accountant practicing from Itanagar since 1999)