Taxing times

As India becomes more familiar with GST, Rebecca Abraham takes stock of issues that have presented interesting challenges

When India introduced a goods and services tax (GST) at midnight on 30 June few expected the transition to be smooth. Representatives of large companies said they were more or less prepared for what is a radical overhaul of the country’s indirect tax system, but a large number of small and medium-sized enterprises across India were not.

Frequent statements from the government – some more persuasive than others – about the merits of the GST followed. A federal minister, Arjun Ram Meghwal, even compared the new tax to a daughter-in-law who takes time to adjust to her new family.

Be that as it may, when the first filings under the new taxation regime had to be made on 25 August, only 65% of the taxpayer base responded.

Impact on investment

The filing was the first major test for the IT infrastructure of the new regime which is managed by a non-profit organization, the Goods and Services Tax Network. Nearly 8.5 million taxpayers have registered on the GST portal and its integrity and reliability are vital, with the typical taxpayer now required to file a minimum of 37 returns each year, up from about half that number previously. While the compliance burden for companies is set to rise as a result, the GST portal has repeatedly thrown up hurdles for taxpayers during the initial couple of months of the new tax.

“Banks had to go through a whole gamut of registrations and system interfaces at the initial phase and it was a fairly daunting experience,” says Mohit Shukla, managing director and legal head at Barclays India, who adds that “over time the system will settle down and consolidate, and it will result in less rather than more”.

Dividing goods, services necessary under GST?