By Govind G. Goyal
Chartered Accountant
The GST law requires that:
i) Every person, supplying
taxable goods and/or services, to take registration if his aggregate turnover
of all supplies of goods and services (including tax free and exempt supplies)
exceeds the prescribed limit during a financial year;
ii) All those persons who were
registered under the earlier laws (Excise, Service Tax and State Vat, etc.)
to take registration w.e.f. 1st July 2017;
iii) Every person so registered,
must report invoice wise details of all sales and purchases every month to the
Central and State Government authorities through various prescribed forms by
the due dates so prescribed and pay the taxes accordingly, every month.
The procedural aspects of filing return and
payment of taxes may be summarised, in brief, as follows:-
(Ref: sections 37, 38 and 39 of CGST Act and
Rules 59, 60 and 61 of CGST Rules)
The provisions, contained in above referred
sections and Rules, require every ‘registered person’ to file monthly returns
in three stages by three different dates every month. While monthly details of
invoice wise outward supplies have to be submitted and filed (in GSTR-1) by the
10th day of the succeeding month, invoice wise details of inward
supplies to be filed (in GSTR-2) between 11th day and 15th
day of the succeeding month, and the final calculation of liability to be filed
(in GSTR-3) between 16th day and 20th day of the
succeeding month. There are two more forms namely GSTR-2A and GSTR-1A. While
information in GSTR-2A is provided by the GST portal to all registered dealers,
GSTR-1A is to be submitted by the suppliers in certain circumstances. In
addition thereto, those who are doing business of providing e-commerce
facility, those who are liable to deduct TDS or TCS and those who are Input
Service Distributors, have to file separate monthly returns (in prescribed
forms) in respect of those specified activities. All these forms have to be
submitted and filed every month, by all such registered persons (other than
those who have opted for composition scheme) by different due dates within that
overall limited period of 20 days. And the dates so prescribed (i.e. by and
between) have to be followed strictly. In case of failure, there are provisions
for levying Late Fees and penalties, etc., if any of these returns are
not filed within that prescribed date/s of filing, as well as levy of interest
for delayed payment, if any.
Representation to Government and
Assurance:-
Considering such a cumbersome procedure of
filing returns, almost all trade associations, from all over India, requested
the Government that such a procedure is impracticable and needs to change. It
was also represented that it would be almost impossible for small and medium
enterprises to comply with the requirements in such a manner. Various
suggestions were presented before the authorities concerned to simplify the
procedure. Two major suggestions may be noted here as follows:-
1. The three different forms i.e. GSTR-1, GSTR-2 and GSTR-3, which are
prescribed to be submitted on three different dates, should be combined together.
Thus, all that information which is required for the purpose can be submitted
in one return only. There is no need of three different forms for this purpose.
2. The requirement of filing monthly returns should be made applicable
to large tax payers only (those big dealers/registered persons who are having
large turnover of more than certain prescribed limit). All others should be
asked to file quarterly return (as was the procedure under the earlier laws).
Further;
3. It was specifically represented
that small and medium enterprises (SMEs) should be asked to file one quarterly
return (instead of three returns a month).
4. It was also represented to look
into the tax collection data, available with the Department, which may reveal
that 80 to 90 % of revenue is contributed by 10 to 20 % of total tax payers.
Thus, remaining more than 80% of tax payers contribute just 10 to 20 % of total
revenue to the Government. But, these 80% tax payers (most of them falling in
the category of small and medium enterprises) play a most important role in the
entire chain of production and distribution of goods and services throughout
the country. Their concerns need to be addressed appropriately. The procedure,
which may be applicable to large and very large tax payers, cannot be made
applicable to small tax payers, particularly those falling in SME category.
The Prime Minister, the Finance Minister and
the Revenue Secretary of the Government of India, who met representatives of
various SMEs, at various occasions post implementation, personally appreciated
the importance of role played by SMEs, acknowledged the practical difficulties
of stringent compliances and assured to mitigate the hardship faced by them. In
fact, the Prime Minister, in the first week of October at a public rally, made
a big announcement that we have provided big relief to Small and Medium
Enterprises (chhote and majhole udyog). It
was impressed upon that the SMEs will now file only one return every three
months instead of three returns a month to be filed by other taxable persons.
However, the GST Department issued a
press release stating that all those tax payers whose annual turnover is up to
1.5 crore will file quarterly returns instead of monthly returns (although no
notification was issued to that effect).
Problem and Unfairness: Who are SMEs?
Our Government, specifically almost all our
ministers, time and again have said that we take due care of our small and
medium business enterprises as the SMEs play an important role in our economy.
There is a separate ministry in the Government to look after the welfare of
Micro, Small and Medium Enterprises. And, if we look at the definition of SMEs
as provided in Micro, Small & Medium Enterprises Development (MSMED) Act,
2006, Small and Medium Enterprises are classified in two Classes i.e. (1) Manufacturing
Enterprises and (2) Service Enterprises.
Small Enterprises (in the manufacturing
sector) are defined as those who have investment of more than Rs. 25 lakh but
does not exceed Five crore rupees. And in the service sector, the investment
limits have been kept at minimum Rs. 10 lakh and maximum Two crore rupees.
Medium Enterprises (in the manufacturing sector) need to have
investment of more than Five crore rupees, but not exceeding Ten crore rupees,
while for the service sector, this limit is rupees Two crore and Five crore.
Although the above definitions are based upon
investment in business (plant & machinery, equipments, etc.), there
is no turnover criteria prescribed under the MSMED Act, but one can expect that
the same can be worked out by applying Investment to expected Turnover ratio
(which may be considered as between 1:5 and 1:10). Thus, expected turnover of
SMEs may fall between 10 crore to 100 crore rupees.
Based upon the ground realities and assurance
given by the Prime Minister, the SMEs were expecting that Government will
provide relief at least to all those dealers, whose annual turnover is up to 50
crore rupees. As the trade and industry was not asking for any monetary aid,
there was no loss of revenue to Government, it was just asking for simplified
procedure of statutory compliance, the SMEs were sure that their Government
will certainly take care to mitigate their hardship, but it looks like that the
Departmental authorities have some different view. From the developments so
far, it looks like that according to GST Department, the SMEs should not have
turnover of more than Rs. 1.5 crore per annum.
And if that is not the intention, then it
would be necessary to clarify the issue in larger public interest. Either the
definition of SMEs under MSMED Act needs to change or the mindset of those who
are responsible for designing and approving procedural aspects of GST
compliances.
Is It Fair?
The question arises, is it fair to ask a
businessman to invest Rs. 2 crore to Rs. 10 crore in a business which will have
turnover of just Rs. 1.5 crore per annum?. _
