It has now been more than a month since we went past the 100-day landmark of Good and Services Tax (GST) implementation in India. It was on 1st July 2017, when the rubber met the road, as far as GST is concerned. Till then, all law-making, rules, clarifications, etc., were theoretical in nature as far as the taxpayers were concerned.
Before the implementation of GST, there were expectations that there would be a uniform single tax rate, which would result in an effective tax collection and compliance system. There were also concerns as to whether the entire ecosystem of taxpayers, advisors, department officials and the IT system being built by GST Network (GSTN), would be ready in time. It was observed that while large companies had started gearing up for GST early enough, startups and SMEs were relatively late-starters.
Presently, while a part of the startup industry has aligned itself well with the GST regime, many are still struggling within the new paradigm.
Due to glitches in the IT system of GSTN and difficulties experienced by taxpayers, the GST Council has repeatedly, provided relaxations in the form of extensions, waivers, and rate changes. For instance, the provision of reverse tax payment by the recipient on procurements made from unregistered persons has been deferred until the start of the next financial year. To overcome the difficulty in furnishing invoice-wise details, the facility of filing quarterly returns has been extended to all small businesses. Imposition of late fees has also been waived in view of non-availability of transitional credit due to procedural issues.
GST: Another Jolt For Ecommerce Startups
Many startups operate in the retail / online space. After demonetisation, India’s online retail market has now received another jolt. When GST was being introduced, it was believed that it would give a boost to the ecommerce industry by eliminating hurdles in inter-state delivery, like the entry tax introduced by some states. However, GST poses a fresh challenge to this sector because of the mandatory registration requirement for persons supplying through online portals, or even having inter-state supplies (which has now been relaxed).
Further, most suppliers associated with online portals are micro-entrepreneurs having a sales turnover below the exempted threshold of INR 20 Lakhs. There is a clear disparity between online and offline sectors, where such suppliers are required to be registered if they operate online, unlike those who operate offline only.
In view of representations made by industry, appropriate amendments were carried out in respect of certain services such as housekeeping, hotel accommodation, plumbing, etc., and the liability to discharge tax was shifted to the e-commerce operator, in turn, thereby relieving the service providers from such onerous compliances.