Goods and Services Tax is arguably one of the most meticulously planned indirect tax systems that India has ever envisaged. Technology has been extensively used in order to ensure that every transaction gets accounted for and every penny is paid to the government that is due towards it.GSTN i.e. GST Network has developed a strong platform for data collection, filing returns and assessing the returns. But the system in its attempt to cover every transaction has gone into an area which is proving to be its own Achilles’ heel now.
Firstly, GSTN failed to realize that without a standardized invoice system across the country, it is very difficult to reconcile the transaction details from the buyer side and seller side.GSTR 2A of a buyer reflects the tax it has paid to different sellers as uploaded in the GSTR1 of the sellers. Ideally, one’s own record of tax paid during various transactions should match with GSTR 2A as given by GSTN. However, GSTR 2A and one’s own expenditure transactions hardly match. For example, the south central railway could on an average match only 2000 records out of 20000 records present in GSTR 2A for a particular month. The main reason for this mismatch is wrong uploading of invoice number by the parties.
Secondly, In a country which has a large informal sector, the manual entry of data by businesses employing semi-skilled or unskilled people for data entry is no big surprise. In fact, considering the literacy level of people in India, policymakers should have thought of focussing more on standardizing the invoices and putting more effort on GST infrastructure present with the businesses.GSTN is good but the accounting systems which informal sector has can hardly match the technological status of GST. The result is that the compliance cost of GST has gone dramatically up. For example, the railway itself has a team of five people to handle GST regime whereas service tax was used to be handled by a single person.
However, for small businesses and shops keeping such an organization that is completely dedicated to the purpose of GST is a big burden. The result is either their expenditure on chartered accountants have gone up or they are simply exhausted complying with GST.
Last but not least, GST may be a paradigm shift in way taxes are levied and collected but it has failed to provide a shift in the philosophy of tax collection. Is complying with tax demands only the duty of the citizen or the government has to put effort to earn its taxes? A businessman is expected to first earn money, give a record of it in the format as desired by the government, fill at least two monthly returns and then use high-end technology to file the annual return. Is it fair to burden businessmen even when GST is touted as an end to end reconciliation system? Shouldn’t the government take responsibility to ensure that compliance cost is as minimum as possible?
The government needs to give fresh thought to the fundamental philosophy of GST which was to make tax compliance easy and cost-effective. Technology needs to be simplified and must reach the shop floor rather than making people run to the shops of accountants. Paytm scan code technology is one such example of how Paytm made a swift entry on to the shop floor during the demonetization period. The government needs to seriously think of shopfloor invoice system that is directly connected to GSTN. The uniformity is required at data entry level and the government needs to invest in that space.
GST may be a system in evolution but short-term costs that are getting inbuilt in the cost structure of Indian businesses may exert inflationary pressure as well as lead to an increase in unemployment levels. Therefore, there is a need to fine-tune the system to make it business friendly before it gets infamous for compliance burden on the Indian economy.