V S Krishnan, is answering questions on GST from the readers of The Indian Express. A selection of questions and answers will be published in these columns.
How will the tax laws stop a businessman from splitting his Rs 1-crore business into five businesses of under Rs 20 lakh to be exempt from the GST regime? Also, what is the approval process for mapping merchandise to HSN codes? What stops businesses from mapping them to lower tax brackets?
Vikram N Ketkar, Pune
The GST system integrates the value chain from raw material to retail. GST is a multistage levy concurrently levied both by the Centre and the states, and ensures automatic compliance. Businesses would like to buy products from those who raise tax invoices, as they can avail input tax credits. Units that fragment and try to avoid paying GST by staying below the exemption limits would find it difficult to find buyers for their products. Further, fragmented units would also suffer from not being able to get tax credits on purchases made by them, whether domestic or imported. The effort would be self-defeating, as they would be disconnected from the stream of business transactions.
Is there a GST component to payments for fuel, and to purchases by debit card or credit card? If so, does this amount to double taxation, as GST is already paid by vendors?
Mohan Purandare, Vadodara
Petroleum products have been brought in the ambit of GST, but five products have been temporarily exempted. Crude oil, natural gas, petrol, diesel and aviation turbine fuel will continue to be taxed under existing excise duties, until the GST Council decides to bring them in. Other petroleum products are within GST. The mode of payment for these petroleum products has nothing to do with GST. It has a bearing only on the discounts granted on the prices charged. There is no double levy. Therefore, the use of debit cards or credit cards does not materially affect the levy of the GST in any way.
I have four short questions: (i) Where can textile traders (non-VAT) register themselves? (ii) Where can the code numbers of textile products be found? (iii) Is it true that each and every purchase bill and sale bill has to be submitted or uploaded with the monthly return? (iv) Will the assessment be monthly or annually?
Kamal Prasad Soni, Kolkata
The answers to your four questions are as follows:
(i) Fabrics have been brought under GST for the first time, and therefore fabric manufacturers will need to register themselves. The window for new registrations opened on June 25, and remains open now.
(ii) Code numbers for textiles can be found in the existing central excise tariffs. HSN codes have been used by the CBEC for a very long time. These codes are based on an internationally accepted trade classification, and can go up to 10 digits. In the GST, they have been restricted to four digits. The use of such codes is extremely helpful as they are understood by businesses all over the world.
(iii) A wrong impression has gained ground that invoices have to be physically uploaded. All that taxpayers have to do is upload the details of outward supplies by the 10th of every month. Invoice details have to be provided only for transactions that are in the nature of business-to-business transactions. The HSN code can be given against the summary of monthly transactions.
(iv) A system of monthly self-assessment (to be done by the taxpayers themselves) has been put in place. The verification of compliance can be done through a scrutiny of returns for smaller units, and audits for larger units.
In the wake of implementation of GST, many small-town retailers have embarked on a mild profiteering spree by raising prices of most loose, non-packed products, citing “GST impact”. Consumers have no way to check the veracity of their claims, or to ascertain whether that particular trader is within the GST bracket. How and which provisions of the anti-profiteering legislation can prevent this sort of exploitation of the situation by tail-end traders?
Bibhuti Das, Cachar, Assam
GST has only just begun to be implemented. The government has initiated a number of measures like demanding that all retailers display prominently their GSTN number, and the prices of their products. A five-member team headed by a Secretary-level officer will be constituted to entertain individual complaints. This will be an effective deterrent against unscrupulous traders. The government has also given wide publicity in the news and print media to the pre-GST and post-GST rates of many essential products that are consumed by the poor. Vigilant consumer bodies can act as a countervailing force against unscrupulous traders.