Ease of Compliance: Addressing Time-Limit Conundrums in GST (GS Paper 3, Economy)
Introduction:
- Last month, monthly GST collections soared to record-breaking levels, exceeding Rs 2 lakh crore for the first time.
- However, amidst this achievement, the persistent challenges and glitches in the daily application of GST laws remain concerning.
- One critical issue revolves around the time-limit dilemma associated with claiming input tax credit.
One Nation, One Tax Philosophy:
- The GST regime was designed to streamline the taxation system by merging central and state indirect taxes.
- It aimed to facilitate seamless availment of credit on taxes paid for all inputs, thereby eliminating the cascading effect of double taxation.
Understanding the Credit Issue with an Example:
- Consider a manufacturer with a monthly tax liability of Rs 1,00,000 and input taxes paid amounting to Rs 60,000.
- With a cash balance of Rs 10,000, the resulting tax arrears stand at Rs 30,000.
Problems with GST Portal:
- The GST portal often poses challenges, refusing to accept monthly returns unless the entire tax amount is paid.
- Subsequent returns cannot be filed if previous returns remain unpaid.
Time Limit for Input Tax Credit:
- A deadline of November 30 each year is set for claiming input tax credit.
- Failure to pay the balance tax by this date leads to a permanent loss of input tax credit, as illustrated in the example.
Need for GST Portal Adjustment:
- There is an urgent need for the GST portal to accept monthly returns even with shortfalls in tax payment.
- The portal should record monthly tax arrears and allow returns noting the shortfall, with interest accruing until dues are cleared.
Payment Issues for SMEs and Injustice in Tax Liability:
- Many Small and Medium Enterprises (SMEs) face payment delays, exacerbating their challenges.
- Tax liability based on total sales without considering net income is unjust, especially when businesses face difficulties in timely payment.
GST Portal Issues and Needed Modifications:
- The refusal to accept returns until full monthly tax payment is made affects numerous taxpayers.
- The GST portal should accept all returns, noting arrears and applying interest.
- The law should mandate tax arrears clearance by November each year, with higher interest and penalties for non-compliance.
Conclusion:
- The GST Council must promptly address this recurring monthly issue, recognizing that defaults often stem from unfavorable business conditions beyond the control of many small and medium taxpayers.
- Until the GST Portal allows monthly returns with shortfalls, enforcing the November 30 deadline for availing input tax credit should be reconsidered.
