The hasty implementation of the Goods and Services Tax (GST) regime, an error-ridden portal and hefty fines for delay in filing GST returns are some of the problems that have added to the woes of lakhs of small traders who often end up with no earnings at the end of the quarter.
The GST, a new tax regime which was implemented to provide a single and simple tax net for the country, has proved to be complex and difficult in terms of compliance for lakhs of small traders. The burdens on small traders who usually end up with no earnings at the end of the quarter are manifold. The biggest burden is paying fines for failing to file returns due to the GST portal often malfunctioning.
According to experts, the GST portal in itself is a headache as often, it doesn’t work properly. The situation is such that the GST return forms for even FY 2017-18 haven’t been uploaded yet and at this pace, it seems that the return forms for FY 2018-19 will not be uploaded before the end of the second term of the Central government that is in 2024. Many small traders have already started surrendering their GST certificates, as they were not earning revenue, but ended up paying fines to the GST department.
As per provisions under the GST rules, for failing to file GSTR-1, Rs 100 is levied as daily late fees; in case of the GSTR-3B (for those who have nil earnings), this fine is Rs 20 a day, while the same with the entry of some earnings, the fine amount is Rs 50 a day. However, after the 38th GST Council meeting, the Ministry of Finance has waived the penalty levied on GSTR-1.
However, data is not available on how many small traders have returned their GST certificates due to fear of paying fines if they fail to submit their returns, but as per tax experts, they are witnessing a spike in the cases where small traders have returned their GST certificates.
This reporter contacted Central Board of Indirect Taxes and Customs (CBIC) officials to get their opinion on the issue, but couldn’t get any comment. The office assistant of the GST Zone 61 told The Sunday Guardian that officials are busy in completing the audit process required for the Union budget.
Parmeshwar Jha, a tax expert, told The Sunday Guardian: “Suppose you have taken a GST certificate and are running a small business from home, but your firm is not generating any revenue, how you will file your return? You will not be able to pay monthly charges to your chartered accountant for filing GST returns and if you don’t file the GST returns, you end up paying penalty on a daily basis. These circumstances will force you to close your account by returning your GST certificate.”
“Since the GST was implemented, the government has not resolved the problems faced by traders while uploading their returns. It is really shocking that traders are being fined even when the GST portal is not functioning and that is causing delay in filing GST returns,” Jha said.
“Due to the apathy of the government, leave aside financial year 2018-19, the annual GST return forms for financial year-2017-2018 have not been updated on the GST portal yet, while we are about to end financial year 2019-2020.
The due date for filing GST returns has been extended for the fifth time in a row and the biggest irony is that traders will have to pay a fine Rs 100 per day for not filing the annual GST returns. The Ministry of Finance, headed by Nirmala Sitharman, has been giving assurance of introducing correction and simplification in the GST process, but the same has not been done so far,” Jha added.
On 18 December, the GST Council had extended the final date for filing of forms GSTR-9 (annual return) and GSTR-9C (reconciliation statement) for 2017-18 to 31 January 2020, from 31 December 2019.
Rajeev Kumar, a chartered accountant, told The Sunday Guardian: “This is gross injustice to penalise people for mistakes they have not committed. Why should traders pay a fine when the GST portal is dysfunctional and causing a delay in filing annual GST returns? Also, with the pressure to increase GST revenue, GST officials are deliberately delaying the Input Tax Credit (ITC) refunds and in the name of audit, harassing traders.”
“GST which was brought in to simplify indirect taxes and do away with the inspector raj has, instead, promoted the rotten system of inspector raj. For example, to improve the looming revenue shortage, the government has begun a nationwide audit of GST returns for FY 2017-18 and for this, GST offices are sending notices to companies across the board, seeking details on GST and income tax (I-T) returns, much ahead of the due date for annual filing,” Kumar said.
The problems being faced by medium and big business houses are also several. Many of them are facing an audit and being asked by the GST offices concerned to submit a set of documents and this has triggered panic in the business community.
Sanjay Aggarwal, who owns a medium-size manufacturing unit, told The Sunday Guardian: “Many of my friends and I in the business circle have received GST notices in which the GST department has sought 12 sets of documents including details of the business agreements on purchase and sales, sample copies of invoices and bills for the period of audit, returns of both taxes and on taxes deducted at source, input service invoices, cost audit reports, electronic cash/credit ledgers and the like.”
Many business houses say that such audit might increase the inspector raj regime and corruption and that will be against the motive of introducing GST.