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GST rollout- Less time to prepare, more clarity needed

All set and done, there are many questions and doubts arising on the forefront of GST rollout. What are they? Let's find out.

Tags: GST, Goods and Service Tax, National Anti-Profiteering Authority, NAA, CII, Confederation of Indian Industry, GST rollout, input tax credit, Pre-GST, Post-GST, Manufacturers, Indian Retail Industry

BY Shwetha Satyanarayan  |  Jan 13, 2018  |  comments ( 0 )  | 
Rollout of GST

Weeks after the National Anti-Profiteering Authority (NAA) – the institutional mechanism under GST to check unfair profit-making activities by the trading community has been approved, the Confederation of Indian Industry (CII) has called for greater clarity in rules to curb price increase arising from GST.

The federation has stressed that although the anti-profiteering clause was necessitated to keep a check on unethical high profits, analyze long term effects of GST rollout, control price rise and retain consumer trust in the new tax regime, there’s ambiguity in the rules.

The CII, said, “Practical implementation of the regulations without ambiguity and without untoward scrutiny is required, particularly in the initial days of implementation.The rules say, ‘benefit of input tax credit should have been passed on to the recipient by way of commensurate reduction in prices’. However, as this definition is not clear, discretionary bias may creep in.”

Clarity needed on valuation and impact of taxes
According to CII, several factors contribute to pricing decisions, such as supply and demand conditions, supplier’s cost and taxes. Pre-GST and post-GST profits may influence factors such as lower logistics costs and free flow of goods and services across states, elimination of certain taxes, and better efficiency. The anti-profiteering clause of GST law should provide clarity on rules and regulations regarding assessment of valuation and impact of taxes. The anti-profiteering clause could lead to hardship for small enterprises in particular.

Is there less time for preparations?
Expressing concerns that practical and procedural challenges may be faced during the initial implementation of anti-profiteering clause, the CII, says, “Tax authorities will need to be sensitive to natural business outcomes and avoid undue harassment. Also, the clause gives relatively less time for preparation and adoption of new provisions.”

CII further shares that another challenge is complicated compliance. Government has to compare cost of every product pre-GST and post-GST to determine the amount of tax benefit applicable. Manufacturers or suppliers may also deal in several products that are not distinguished in their accounting books, so that determining price margins for individual products will be difficult.

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