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A week of GST: Bumpy ride due to late info overload

A man looks for a book on GST at a shop in Coimbatore ahead of the roll-out of the new tax regime on July 1

More than lack of awareness, information overload after the roll-out of the goods and services tax (GST) is making the transition to the new indirect tax regime tough, according to a top consultant dealing with clients across sectors.

Classes and tutorials, both physical and online, to make people understand the tax system should have started months before the launch, rather than after, the consultant argued. Anita Rastogi, partner, indirect tax and GST, PwC India, said, “It was not a good first week…. We had expected turmoil but what we saw was much more than that.”

Adding to the confusion were statements and notifications flowing out of several ministries and government departments, another person closely associated with the GST processes told Business Standard.A recent consumer affairs ministry notification saying old stocks can be sold with a new maximum retail price (MRP) and the complex steps involved for that is one such example that many are citing. The finance ministry should have been the only nodal body dealing with announcements related to the new taxation system, he pointed out. According to Bipin Sapra, tax partner at EY, “While business transactions have happened unhampered in the week after initiation, dealers are now comprehending the full impact of GST. Uncertain interpretations of rates and law are creating some anxiety.”

Wrong invoices being raised by merchants and dealers were some of the things that consultants had not budgeted for. “My car got damaged and it was taken to a workshop. But it took four days to raise an invoice,” a GST specialist said.

In many cases, the guidance given by the government earlier to tax experts and consultants is now being contradicted by the recently started Twitter handle of the government. “Interpretation of the law is changing every day,” said one such expert, who had expected to be less loaded with GST work after the July 1 roll-out. “On the contrary, our workload has gone up many times as clients, especially the mid-sized firms, are grappling with enforcing the GST.”

Over the weekend, many shoppers, some even in big cities, got a feel of the GST when they were told goods were being sold at discounts as the new tax was not being imposed. The reality was they were not GSTready, a retailer pointed out. The government has focused more on the speed of implementation than on quality, another person linked to the roll-out said.

One of the biggest impact was being felt by the Rs 3.2 lakh crore FMCG sector. Despite its small SKU (shelf-keeping unit) sizes, destocking of old stocks was on full swing during June. Now, companies face the challenge of restocking the trade with products carrying new MRPs. Around 15 to 20 per cent of trade partners like wholesalers and retailers are yet to register under the GST and put in place a system of filing returns, analysts said. According to estimates by Edelweiss, revenue and growth in profit could witness a slowdown.

Praveen Khandelwal, secretary general, Confederation of All India Traders, said the trading community had successfully adopted the GST, though he added that there were many concerns related to lack of knowledge on the fundamentals of the taxation system. The first nine months would be critical, he said, while pressing for government subsidy for traders going digital. A trader, who did not want to be named, said, “If the government assists small and medium businesses in the form of subsidies to make a transition to the new system, the revenue secretary’s master class (recently started GST lessons) may not be needed.”

On a more practical note, an executive from a consumer durable company said it would be important for the dust to settle before mid-August, when the festive season begins. The sector gets at least 40 per cent of its yearly sales during the festive months. As for penalties and legal action on offenders, PwC’s Rastogi said, “The government must be very, very lenient during the first quarter.”

Business Standard, New Delhi, 10th July 2017


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