GOOD AND SERVICE TAX :: WHY IS THAT THIS TAX SYSTEM IS MEETING WITH THE FAILURES AND THE REMEDY

Pic :: Total Central Expenditure as a percentage of the " GDP " 

Good And Service Tax :: The Execution And The Implementation Is Wrong

The Good And The Services tax known as the GST had created a lot of ripples and a lot of mysterious questions about it’s failure at places and about the implementations at times. The pertinent question that arises is-:

 WHY IS THAT THIS TAX SYSTEM MEETING WITH THE FAILURE 

Well the answer is that if we take the root of the problems then there are the businessman who have not understood it in the proper light. There are anomalies and there are certain correction that needs to be done and implemented in the system. Without it the proper effects that would SOOTHE all the one’s who fall under this system will never be at ease and the Government will keep on finding itself that onsite application that it is engaged in doing, and inspite of the best possible effort,  and inspite  of the best possible brains who are putting in their best of the effort, the purest of the , effort the GST continues to raise questions after questions.

Let us come to the MOOT point of the system that engulfs and that covers the GST. We start our studies from the root level.

At the deepest part or at the root there lies the businessman and the business class who are the utmost PETTY businessman. Their BTO ( Business Annual Turnover ) per annum  could be anything between Rs 15, 000=00 to about Rs 2,00,000=00 per annum . These business entity inspite of the fact that they DO NOT FALL under the I-T earning and it’s slab, they pay the GST whenever they but the product for their business from their supplier .

It is a THREE layer of business cycle and this is as follow- :

Pic :: The SIMPLE THREE layer of petty business

Here in the picture above there are three layers. The " SB "  is the Small or the Petty Businessman  the " B " is the  business entity who is a supplier and the SB buys his material from the supplier to sell his product to  " R " who is a RETAIL or an END-POINT-PURCHASER of the goods for consumption. The " SB "  buys his materials that he wishes to engage them in the sale or in the business pays the GST for the material purchased,  from the one who is a SUPPLIER to him. Here the business completely runs on the system of  LOAN and PARTIAL PAYMENT. This is the crux of the utter level of deep rooted or the deep down root of the people who are the buyers and the sellers.

The buyer here buys material worth say Rs 2,000=00 but pays Rs say 1500=00 to the say shopkeeper .The remainder which could be termed as the LOAN is for Rs 500=00 for that month. The next month he again purchases the household material for Rs 2,000=00 and the total  payment is Rs 2500=00. However the payment made is for  say , Rs 1800=00. The balance to be paid then is Rs 7,00=00 . This goes on and on for the year.

Here the case of intrigue is that while the businessman " B "  is paying the entire GST to the supplier for purchasing his materials or the goods in ONE shot to the supplier the returns of the GST for him is not RECOVRED by him in TOTO or full. The remainders of the LOAN and the amount which he is letting off to the retail customer from his shop is recovered by him in parts. This really sparks to adding the problems, a teething one for " B " and this is the FIRST POINT that the Governemnt of the day needs to understand. 

This is the hindrance and this ought to be noted. For a business  sale of Rs 2000=00 which he ie , " SB "  effects, he gets back Rs 1500=00 on which he recovers the GST but the GST paid by him to purchase the entire material is paid by him in full to the supplier. The DEFICIT that he falls into to maintain his business actually puts him in a lot of PHIX. This is the case of say ONE customer. If he has FIFTY such customer the deficit is Rs 500=00x50- Rs 2500=00 . In other words he is on a deficit to collects the same amount through the sale in ONE SHOT but he is paying to the Government everything for the GST in ONE SHOT.

 THE DIFFERENCE IS RECOVERY AND THE PAYMENT IS A FACTOR WHICH THE GOVERNMENT HAS TO THINK ABOUT THE SAME TO KEEP THESE PETTY SMALL SCALE BUSINESSMAN SAFE AND TO BE IN THE BUSINESS.

Who Are The Retail Customer For These Kind Of A Businessman.

Let us take the case of a SHOPKEEPER situated at say a COAL FIELD Area. The ultimate customer for these kind of a petty shopkeeper are the one’s who are the LABOURERS, the OFFICE PERSONNELS that starts from the CLERK and runs upto the CHIEF DEPUTY MINING ENGINEER who runs the entire COAL MINES. I take COAL MINES as this is ONE of the BEST NAVRATNA of the Government of India and the pay are much higher . 

I have seen with my NAKED EYE even the CDME of a COAL MINES taking the household items from the so called petty shopkeeper on a loan basis that I have explained as above and even when I was a Assistant Manager at TRIFED and was on a official duty for KARANJ SEED procurement at the area of Bihar then, now Jharkhand, at Ranchi, the Manager Mr Ashutosh Dutt Mishra  ther Regional Manager of the Racni Office at TRIFED , falling onto this system of buying the household material from one of the Departmental store situated at the Albert Ekka Chowk  at Rachi , where he had purchased household material worth Rs 3000=00 and had paid Rs 2,000=00 to him asking him for a benefit of a LOAN of Rs 1000=00 which would be paid the next month.

It is useless to say that it is only the LABOUR CLASS that thrives and lives on these kind of LOANS as against the household material that they buy to run their house. I’m citing this case of the year 1994 when I was at Ranchi and was deputed to assist Mr Mishra to procure the KARANJ SEED for extracting the OIL and the DOC ( De OILED CAKES ) of it.

This is a problem that the petty and the very small business owners are facing and their business is going to the DOGS. This again is posing and had POSED a SERIOUS LIFE TAKING fatality and the  factualities to those who are the WORKING CLASS people.  

THE GOVERNMENT OF THE DAY OUGHT TO RETHINK AND COME OUT WITH A SOLUTION FOR THE SAME. If NOT given a PROPER thought and if these small and the petty shopkeepers are NOT considered it will create the following troubles for the one’s who are based at all over India and especially at Bengal, Bihar and Orrissa-:

1 ). A VOLUMINOUS number of shops will disappear from the business. Many have already disappeared .

2 ). The employment of many a EVERYDAY PAID WORKER employed in these shops will cease off and disappear.

3 ) . There are many full time employed workers  in  these shop. They will have no jobs for them to do anything for feeding and keeping them and their families alive.

4 ). The business of those who thrive on these kind of business  will die an unnecessary and a unnatural death.

5 ). The State and the Central Government will loose unlimited amount of REVENUE and it’s collection and their treasuries will remain empty.

Application of the above in other sector

This is a MODULE, an UMBRELLA.   This is applicable and this is applied to the other sector which starts from a small factory whose TO maybe around say Rs 2.50 Lakhs per annum to anything which maybe around Rs 5.00Lakhs per annum.  I'm for the sake of an example taking these figures. The BTO can be more and much more but for a simple tasking , I'm taking a less and an imaginary amount. There maybe workers small in number and magnitude who are employed in these kind of business units. Now imagine if the GST and it’s nomenclature is not made a bit FLEXIBLE and a BIT accommodative then  WHERE WILL THESE KIND OF S&P ( Small and Petty Business )  BUSINESS GO.

In Bangalore alone in the period between the year 2004 to now there has been about 19,000 small and mini scale business units which has winded up. These 19,000 business units, all in the manufacturing sector, has and might have lost 19,000 x 10 workers = 1, 90, 000 workers. That is for sure.

Calculate the TAXES that the GOVERNMENT now is losing per month, calculate the business say a TEA SHOP KEEPER , a MEAL SELLING SHOP is losing whose business are dependent on these workers who feed themselves at these shops,  and overall calculate the job loss that has occurred. WHY IS THIS .

It is because of the fact that the Taxes implied by the Government was not flexible at all to these small business units to run their business and also the fact that they have been pounded by the BIG SHARKS of the business. The BIG SHARK like the Tatas, Birlas, Ambanis and the one’s like Dalmias etc can run their business by any manner as they are not short of money but these business units run on the basis of LOANS  - the   CONCEPT while purchasing the materials for production and also while receiving the payments after they sell their produce manufactured by them in the market and how they collect the money and let the LOAN prevail for their business to prevail is explained by me .

The Tax structure implemented after it is imposed on the business units and on the people have been very WRONG and it forces the tax payers to PAY THROUGH THE NOSE. The business climate that prevailed and always prevails and the payment of the TAX STRUCTURE and it’s mode of payment have been always contradictory to the actualities and the ground realities and factual.

These are the things which the GOVERNMENT never has understood and is always at WRONG to understand that. This requires an EVEN balancing of the same.  It is so PERIL of the IMPERIL to think that a I.A.S Officer who is the say CHIEF SECRETARY to the Finance manager of the GOI whose qualification is M.A (English ) and who does not knows anything about the A , B , C , D , of Commerce and Taxation as he had not studied these in his College days is approving all the tax Formulation and implementation for the GOI especially for the Ministry of Finance under the GOI for the people to fall under it’s ambit of payment. IS THIS NOT A RIDIDULIC RIDICULE.

These are the WRONG ‘ UNS which had and has TURNED the BUSINESS into  URNS to CHURN the LIFE out of the one’s who have fallen to the victims of these wrong taxation and it’s system. There was another case where a I A S Officer , a very  senior one, was handling the Department of the Chemical Ministry at he Union Government Office who was a Master Of Music from Allahabad University when Mrs Gandhi was the Prime Minister. Can I ask you one thing, or a question ,  will that I A S Officer would be in a position to explain BOND-CRACKER as a complex compound without having studied atleast Chemistry upto the B.Sc standard . When the question of BOND-CRACKER would arise in the case of handling a Petro- Chemical industry,  and the problems to which he ought to provide a solution to the same, he would take it  as a CRACKER that is exploded by burning it during the time of Deepawali. WHAT DO YOU EXPECT THESE KIND OF AN I.A.S Officer to execute which would BENEFIT the nation.

Why cannot these kind of MAHABABU send to a SANGEET VISHVAVIDYALAYA  to be a CHIEF of that University to produce someone like Tansen or a Suryasen knowing fully well that the I.A.S Officers just DO NOT HAVE IN THEM to produce a Lata Mangeshkar or a Kishore Kumar Ganguly. Ablest and atleast  they would produce a Tansen or a Baiju Bawra of this era who could make it to the semis of GAANA- BAJAANA programma, of the Indian Idol Ka Khoj where they could do some NONSENSE before pushing off . Ablest and atleast  they can do it if the placement of these kind of an I.A.S Ofiicer would have  been correct. May I again ask you one more question- WHERE IS THE INDIAN PETRO CHEMICALS HEADQUARTERED AT BARODA  today. We see the Reliance Industries at full swing and the proprietor of the same being ONE-OF-THE-RICHEST-IN-THE-WORLD today, but where is the IPCL, Baroda today. If it is NOT there, who is to be blamed.

The moot question is  the GOI has to do all the executions correctly and choose the right candidate to do it correct. The selection of the candidate has to be judicious rather than emotional and the industries have to survive. That is the BASIC job of the Government.

 THE GOVERNMENT HAS NO BUSINESS TO BE IN THE BUSINESS EXCEPT IF THE BUSINESS NEEDS THE LATERAL AID OF THE GOVERNMENT

However the Government always has been in the business wrongly and listening to the WRONG ‘UNS it has always ruined the business. The political parties, many of them like Mr Madhu Dantvate, the Left and the COMMIES are totally responsible for ruining the small and the mini sector of the Indian Business and the wrong implementations of the tax structure from time to time and the wrong advises and the consultancies that it received from these kind of I A S Officers on many an issue has completely put the entire system of the hook and in the wrong place..

How Can The GST Be Made To look Attractive And easy To handle

A lot of petty and small business class  have NOT understood the gamut of the GST in an proper manner. As a result they have folded their business and that has compounded their problems.  Well  how to make it attractive, to look and feel and make it essay as good as easy .

Pic :: Benefit  Of The Tax Structure To The Business Class  .

My point of view is select either say a few maybe say 50 in numbers , those personnel's who have retired from the job and who are fit enough to render their valuable service . Take care to see that they have handled the Accounts department that relates to handling the matters of taxations etc. You may also recruit say the B.Coms having scored just about 48 % to about 51 % of marks in their graduations.  DO NOT GO IN TO RECRUIT THE MBA’S OR THE CHARTERED ACCOUNTANTS OR THE ICWAI just for the heck of it.

The reason I say that choose the average one’s or the one’s possessing the experience of Taxation handling the accounts in their respective offices from where they have retired,  is that their BENT-OF-MIND will fall very quickly when they deal with the petty and small businessman and would mingle with the bent of the mind of those who are illiterate, uneducated but are in the business of running the petty and the small shops as well as the business ,  and who would require them to be assisted by the Government appointed Officers to file their GST correctly and also to get the returns from the GST.

It is NOT very easy for everybody to fall and assimilate their bent of mind with these kind of business people as their language, attitude, aptitude and their behavior will be somewhat very unbearable and hard to bear but again,  if these kind of the personnel just adjust to their bent of mind the things would start moving.

Train and teach these personnel’s all about the GST, it’s nomenclature , it’s fundamental and how it applies on the business for the businessmen to file to pay for the GST and how that it could be useful to filings the returns for getting the money back. This will be helpful in many  a ways. .

There has to be one formulae and a method to register all these kind of business people with these kind of a Government agency and with the help of the Aadhar card, their PAN CARD, their proof of the address and their Bank Pass book reflecting their Bank Account, the GST filings as well as the returns of the money on  and from GST etc can be filed and the help could be rendered to these kind of a business class. This will reduce the pain of these business people to approach the Chartered Accountant or the Tax Filing Consultants who charge so heavily that these so called the  small and petty businessman finds that hard to comply with and pay them to file their GST and it’s returns etc.

If a small and a petty businessman is not filing any IT as his income does not falls under the IT and it’s structure or it’s nomenclature whereas he is paying for all the items in terms of the taxes then the Government should also consider to RETURN him something from the GST paid so that he utilizes that amount to once again reinvest on his renewal of the GST and the nominal fee that is implied upon that or upon it. This will help in a lot and as a business to grow a lot. This will INFUSE and ENTHUSE some spirit and enthusiasm in the small and the petty business community to do his business more purposefully and effectively.

Care has to be taken that the so trained personnel who are appointed as a Consultant by the Government in this matter are not send to places  like Nagaland where there is no business at all. They ought to be send to places like Maharashtra, Karnataka, Uttar Pradesh, Madhya Pradesh just to cite them as an example ,  where there are some business abreast and at least   for these to work religiously for the same.

This is a small input and a small example I have jotted here. More and better ways and method could be there for a better expedition for this job and the Government can work on those modalities and the modules to arrive at a figure and a structure to implement this to the best and for an effective output.

.The recent polls at Bihar was an class example of  HOW THE GST HAS COMPLETELY ANNIHILATED AND DESTRUCTED TO THE GRINDS AND TO THE MINCE BY THE GST. It was NOT because of the fact that the GST killed them, it was because of the fact that they DID NOT GET TO UNDERSTAND THE GST well and in a proper manner and about how to use that effectively for the business. Bihar completely hinges on the PETTY AND SMALL BUSINESS and the petty shopkeepers are the one’s who provide a lot of the jobs to the illiterate labour and also the taxes that they can pay to the Government. This infact is a INDUSTRY FOR SURVIVAL at Bihar. However the fallacies that was made to circulate by the opposition and the  inefficient as well as lack of knowledge completely overturned the business community and made a JOKE of everything lest it killed the business for ever.

How is the GST at present aligning with the Fiscal structure and does it complies coorectly to the  same . Does the practicalities hold in any way and in any manner. That ought to be understood properly.

GST and Fiscal Fractures

. From the findings one gets to understand that the collection of the revenue from the GST in terms of the tax collection does not comes upto the expectations. The reason is the shortage of those who ought to pay the same from their business. However with the business dwindling how would it be possible. The GST revenue shortfall promises large dents in the Centre and states’ fiscal applecart.

 The Center and State budgets will be pegged down by the gap in Tax revenue. The common man will find himself on the receiving end if such a gap in revenue continues. To bring states on the same wavelength and approve GST, the government had offered state compensations to the tune of Rs 60,000 crore for July to March in Financial Year 18. This I’m taking as an example for the business year which ends on 2018.  In order to stay true to its pre-GST promises, it is estimated the Central Government will have to make payment to the tune of Rs 90,000 crore further in Financial Year 19.

Understandably, the Budget 2018 unleashed record taxation of over Rs 90,000 crore in the form of capital gains tax, increase in customs duty, cess and surcharge. The fall in revenue has further made states apprehensive about bringing petroleum products and real estate under the GST ambit.

For whatever it is-  IF THE PETTY BUSINESS AND THE SMALL BUSINESS UNITS ARE NOT ENCOURAGED TO FUNCTION AND STAY IN THE BUSINESS THE SHORTFALL WILL CONTINUE AND THIS WILL KEEP ON HARMING THE GOVERNMENT. The salary class will be PINCHED and POKED hard for the MAKING-OF-THE-DEFICIT  and that class will be NAILED to it’s DEATH.

It is IMPERATIVE to keep the small and the petty business in rolls and to encourage them to do their business. The Government ought to think on the lines of the suggestions that I have made.

Adapting to IT Ecosystem is Hard – A NOSE HARD HIT THAT ROLLS BLOOD FOR CA

Indian economy is majorly driven by small business units i.e SMEs. To cite an example, there was a time when 75% of the tax was constituted from the business from the Small Scale and the Petty Business industry and West Bengal then was the champion in this race for many a years to contribute the HIGHEST in terms of the tax from this  domain of the industry. Now with the sector completely dwindling, as we see in most of the cases,  it t will be unfair to expect small-scale business firms to make the transition to an online IT platform and expect no errors in return filing. It is an uphill task for the majority of our working population which has little hands-on experience with IT solutions. The cost of SRP deployment is a major concern for micro-small-medium scale enterprises.

Challenges CA is Facing Under GST

The roll-out of the Goods and Services Tax Act (GST) in India is followed by the beginning of online GST Registration and e-filing of GST Return filing. Among regular amendments & digitalization of tax-related tasks, and this is NO EASY JOB.

 Chartered Accountants are constantly coming across various challenges that vary from using the online GST mechanism to the alignment of their books & records to meet the new GST requirements. This led to the investment of increased efforts and time by CA due to incorporation of details such as customer’s address & GST Number, HSN Code (Harmonized System of Nomenclature) for products & SAC Code (Services Accounting Code) for services in the invoices and issuance of documents such as a Debit note, Credit note, Receipt Vouchers, Bill of Supply & E-Way Bill under the various circumstance.

The administrative work of CA has also increased due to mandatorily filing of several returns, based on the constitution & the sales turnover of the business. Besides a CA has to manually furnish details & enter all invoices & bills into different tools or company’s software or spreadsheet to adhere to the GST mechanism, followed by the creation of GST reports, cross-verification of company’s purchases, sales & ITC details, correction of mismatches and finally upload of information to Government’s GST portal.

 Under GST, a CA has to ensure the reconciliation of data between the seller and his supplier to claim full ITC and avert unnecessary payment of taxes. Reconciliation is a tiresome & a time-consuming job that has to be executed on a monthly or quarterly basis, depending on the company’s turnover.

These are no easy a task and the CA finds it very hard to explain the clients that he deals. It is here that the ignorant and the illiterate business owners that falls in the S&PB sector ( Small And Petty Business Sector ) that they find it very hard to understand and move ahead with the filing of the GST and aligning themselves to the need .It is because of this the CA’s are charging too much that these kind of a business community finds it hard to pay.

It is here that the above suggested measure that I have explained as above ought to be implemented and executed by the Central Government as a measure to strengthen the Tax payment method and it’s measure.

Some Pertinent Issues for Small Traders

GST implies additional operational costs for Small businesses. These adds to the overheads of their business.

Pic :; Time And Inexhaustible Problems Surfacing The GST 

 In a developing country like ours, not all SMEs will be able to afford the cost of computers and accountants required to implement GST (make bills and file tax returns). 28% GST rate on some products like plywood, automobile parts, and electronic items forces potential buyers to opt for unregistered dealers.

The Chartered Accountant or the Consultant of the Tax that engages itself in helping someone filing the GST for payment or it's return therefore will always add on his OVERHEAD charges which would have to be paid by the customer or the business personnel's as we call them. This is really a scaling and an  escalating  charge for the business community to bear, Here it is the Government has to come upto the points and the modules that I have suggested. This will save many , many and many a business. 

In all the Government will have to build up a GOVERNMENT AGENCY totally as an CONSULTANT with all ingredient provided to them to help the S&P business units to fill in their GST forms and the returns from the GST as well in terms of the forms, to help them avoid that expenditure in terms of the service charge that they end up paying the Chartered Accountants and the CONSULTANTS of the taxes . This infact is a heavy saving to these S&P's in a , maybe a large or a small measure. 

It is too difficult to assign MRP to handmade products like local shoes, Banarasi Sarees, etc. Most small artisans are illiterate and therefore unable to write MRP on their products and/or do any paperwork. Dealers are confused about how to rates such products.

Small businesses that have a small turnover and need not pay GST face trust issues. Incase if some pay as they might have to pay , let a system of returning back the payment also be made available to tjhem as well

Buyers demand bills from even those sellers who are exempted from GST. Without proof of a certificate of GST exemption, small shop owners find themselves stranded and immobile.

The Confusion

For a frictionless and less burdened GST, the government is looking to shore up revenues to the tune of Rs 1 lakh crore per month.

It would be interesting to see if the Government still has the courage to take stern measures against tax evaders and other business firms involved in anti-profiteering activities.

The GST was projected as India’s second tryst with destiny. However, the financial budget of 2018 has thrown a wide plethora of taxes at the Indians to gobble up.

 Increased taxation is the only way of generating operational revenues for a complex system like GST in the nonlinear Indian Demographics. How to do that. Well I have explained and wriiten about it in so much a manner and I have also suggested about how to add the business in terms of units to it.

It is for the Government to KISS ie (K)eep (I)t (S)imple and (S)traight to provide the excitement to the " SB "   to carry out a roving business in their own terms and manner , and soothe to the business units and unless and until  you add the small and the petty shopkeepers as well as the petty and the small business units  YOU, THE GOVERNMENT  WILL BE NEVER BE ABLE TO FULFIL YOUR TARGET AND THE JOB AS WELL TO THOSE WHO FITS IN THIS SECTOR, AND THUS  THE JOB REQUIRES INTELLIGENT MEANS TO EVOLVE A METHOD TO DO IT.

Well , that is it

Regards and Thanks

Pics

Shyamal Bhattacharjee 

Mr Shyamal Bhattacharjee, the author was born at West Chirimiri Colliery at District Surguja, Chattisgarh on July 6th 1959 He received his early education at Carmel Convent School Bishrampur and later at Christ Church Boys' Higher Secondary School at Jabalpur. He later joined Hislop College at Nagpur and completed his graduation in Science and he also added a degree in    B A thereafter. He joined the HITAVADA, a leading dailies of Central India at Nagpur as a      Sub-Editor ( Sports ) but gave up to complete his MBA in 1984 He thereafter added a Diploma In Export Management. He has authored THREE books namely Notable Quotes and Noble Thought published by Pustak Mahal in 2001 Indian Cricket : Faces That Changed It  published by Manas Publications in 2009 and Essential Of Office Management published by NBCA, Kolkatta  in 2012. He has a experience of about 35 years in Marketing

 

Signature Of Shyamal Bhattacharjee

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