What Were the Arguments by Traders Against GST Implementation?

The news of GST implementation hit every media channel on 1st July 2017. The initial response wasn’t the one Indian government was aiming at. A lot of it had to do with the traders’ unawareness of the main advantages of GST.

When India first heard of the new indirect system, the spotlight naturally fell on the cons of the law. Inadvertently, all laws comes with its own set of advantages and disadvantages. The goal of the government should always be to work towards a law that eliminates all downsides. It’s not always possible to do so.

Such is the case with GST. The traders had some strong arguments against the new law and not without cause. The process of perfecting the law is still ongoing but before that, let’s take a look at some of those arguments.

1. The High Compliance Cost

The beginning days of the Goods and Service Tax saw business filing for multiple returns. The initial demands from GST forced taxpayers to pretty much pay 3 returns in and every month. The filings were GSTR 1, GSTR 2 and GSTR 3.

The procedure was meant to match the input tax credit concept to make the claiming easier. Around this time, some technical glitches were detected. The industry had the liberty to file GSTR 3B which is basically an interim summary form. The return enables a taxpayer to avail their credits as well as make an account of their total tax liabilities. The invoice wasn’t mandatory for this form.

Still, the online compliance process for GST return was unnerving for taxpayers, to say the least. The three-month filing return procedure faced cancelation from the GST council because of this. GSTR1 and GSTR 3B are the only ones to be compiled.

On its 27th meeting, an improvement was made with the return filing procedure all around.

Long gone are the three monthly returns and it has been upgraded to one monthly return for now. Two tables grace the return form. Outward supplies one on table and input tax credit on another which is dependent on the invoices.

The structure allows suppliers the freedom to upload invoices as it is happening instead of waiting for return filing time. The buyer can look at the invoice and lock it to the avail of the ITC. The invoices with that of the buyer are matched offline.

2. The Infrastructure

The entire system of GST is based on the fact that every registration, tax filing return, and invoice is done online. It’s a law driven by the IT infrastructure.

A strong argument arose on whether a law such as this is sustainable in a country such as India. There were doubts as to whether we have the technological support or the human resource to fully embrace this law. If we look at the IT infrastructure of countries that have GST, they are a lot more advanced.

India has been rapidly growing technologically but whether the GST law will work as the necessary push to fasten up the IT structure or it will fail to catch up still remains a mystery two years later.

The e-governance model saw implementation on a few states initially and a lot still went along with the VAT system. The states with the GST model has increased significantly.

3. Increase In Cost For The Businesses

A lot of the small businessman was scared of the impact GST will leave on their life. As the filing system had three returns monthly at first, it called for a deeper understanding of the tax law and the ability to fill multiple forms.

Small businessmen weren’t equipped to deal with this and would end up paying for a tax professional. The professionals charged a lot. The current one requires 2 forms but they still end up calling professionals.

For the larger businesses, they would need accounting software which could comply with GST. The employees received extra training to get acquainted with the new changes. This added to the cost as well.

This is a sad disadvantage of the GST system. One of the reasons for the new tax system was to make way for a law that will allow small businesses to thrive.

4. Unexpected Law

The Goods and Service Tax was announced by the government on July 1, 2017. This is smack dab in the middle of a financial year.

The traders were outraged during this period. The sudden switch to the new tax regime on the part of the businessman was difficult.

They were already following a tax rule since the beginning of the year. All of a sudden, without any previous warning, they were expected to switch to the new GST regime. The compliance issue turned out to be severe. People were hoping the tax law would be a fluke and the government would switch back to the previous one.

5. No GST On Petroleum

While the talks for the rollout of GST on petroleum products has been going on for a while, nothing has been done as of yet. This was the same back in 2017. Petrol and Petroleum products didn’t come under GST.

When it comes to these sectors, the states levy their own separate indirect taxes. The traders who dabble in these industries or in industries related to these products aren’t eligible for tax input credit.

An unfortunate disadvantage that not only excludes certain traders, it means the cost for petroleum continues to be high as well.

No tax law comes with only sets of pros and no cons. However, when we have been accustomed to the certain indirect tax law for years, the new tax regime appeared nothing but a burden.

There are still traders unsatisfied under the GST law. Rules and regulations that haven’t accounted for there conditions and have placed them at a disadvantage. However, it is clear the GST council is working to get rid of as many complications as possible.

One day, we hope Indian will catch up to other countries under the GST reign.