THE GIST of Editorial for UPSC Exams : 06 August 2019 (Introspect on GST: The CAG report flags the impact of an imperfect GST Network (The Hindu))

Introspect on GST: The CAG report flags the impact of an imperfect GST Network (The Hindu)

Mains Paper 3: Economy
Prelims level : GSTN portal
Mains level : Simplification needed in GSTN portal

Context

• GST was introduced two years back to make it easier for businesses to pay their taxes, but today they are as befuddled as ever by the GSTN portal which forces them to upload form after form, besides micro-level transactional detail. The recently released CAG report on GST implementation spells out some of the trouble spots. It says: “On the whole, the envisaged GST compliance system is non-functional.

Background

• The deficiencies in the GST system also point to a serious lack of coordination between the Executive and the developers.
• The number of GSTN 1 return filers (the form that requires invoice level details) is far less than those filing GSTN 3B (the form that calls for gross details).
• This can be attributed to hassles in uploading the details for GSTN 1, and not as the bureaucrats running the show seem to believe to any general tendency to evade taxes.
• If “all returns being filed showed a declining trend of filing from April 2018 to December 2018” the blame lies clearly with the GST Network that continues to flounder without being held accountable.
• The so-called simplified format of uploading returns, supposed to be introduced in a couple of months, is full of rows and columns, with needless details being sought.
• The online invoice matching, and the assumption of suspicion underlying it, should be reviewed. Rather than merely create a quarterly filing option for small businesses (below ₹5 crore turnover) and offer them a flat rate of tax under the ‘composition scheme’, GST filing rules should be streamlined for all.
• Small businesses still suffer overheads on account of GST compliance (which includes filling forms in English without any other language option), despite efforts to simplify processes for them.

• Key highlights of the CAG report

• The CAG report has highlighted ‘technical’ lapses, the big picture is of GST per se being a complicated affair.
• The rates, well above 10 in number, are higher than such systems elsewhere in the world. The GST Council has not helped by creating dual systems in certain sectors such as real estate, where 5 per cent can be paid without claiming input tax credit and 12 per cent with ITC.
• The unorganised sectors continue to operate below the radar not necessarily because they wish to do so, but because the rates are high, more so if they have to remain under the composition scheme where tax credit is  ruled out, and compliance formalities daunting.
• At the federal level, the CAG points to IGST dues not being paid on time to States, some ₹2.11-lakh crore in 2017-18.
• This could disrupt the existing consensus over GST reforms.

Conclusion

• The Council must focus on lowering rates and simplifying processes, restoring the raison d’etre of this remarkable step forward in easing the conduct of business.

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Prelims Questions:

Q.1) With reference to the Controller General of Accounts (CGA), consider the following statements:
1. It is under Department of Expenditure, Ministry of Finance.
2. Under Article 150 of the Constitution, the Annual Appropriation Accounts (Civil) and Union Finance Accounts are submitted to Parliament on the advice of Comptroller and Auditor General of India.

Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both
D. None

Answer: C
Mains Questions:
Q.1) To what extent the small businesses still suffer overheads on account of GST compliance. What are the measures needed to resolve it.