The complex problem of a simple GST

On Sunday, 29th October, a high level panel on the Goods and Services tax (GST), led by Assam finance minister Himanta Biswa Sarma, came up with some suggestions to help small and medium enterprises (SMEs) and even big companies to navigate GST better. The suggestions included making return filing quarterly for all companies (instead of monthly for companies with over Rs 1.5 crore turnover as at present), expanding the composition scheme ceiling from Rs 1 crore turnover to Rs 1.5 crore turnover, reducing the composition rate to 1 per cent for manufacturers and restaurants, instead of 2 and 5 per cent as at present, and a host of other recommendations.

No doubt these are all meant to address the pain points of companies filing GST, and they are good suggestions. But the unintended consequence of these recommendations, if adopted by the GST Council, will be more complexity, not less. For example, it is not very clear how filing of GST returns on a quarterly basis will help if taxes still need to be paid and filed monthly.

There are other points. How will a big manufacturer who files GST and claims input taxes work with a supplier who files under the composition scheme.

Since its launch, the GST council and various high level committees have been trying their best to bring a degree of simplicity to GST by tweaking rules and issuing clarifications. The problem is that each new rule brought in to simplify existing pain points ends up creating fresh grey areas and cascading confusion.

The essential problem with GST is that it was implemented with too many rates, too many compliance requirements, and too many rules and regulations. Instead of a simple broad rate that applies to everyone, and the same set of rules for everyone, the current form of GST has introduced too many categories and sub categories. And trying to fix it is only creating more confusion - for players, for the GST network, and for all stake holders.