In a report assessing the first 200 days of the rollout of the Goods and Services Tax (GST), PwC has pointed towards the need to prune the highest tax rate to around 20-22% from the current 28%; to align with global trend; to bring clarity by removal of legal loopholes and the need for simplification of compliance-related requirements such as a letter of undertaking in the case of GST-free exports. Following are the key suggestions by PwC for the road ahead for GST:
Pruning of tax rates
An item on the government’s priority list should be further pruning of the rates. While there has been substantial reduction in the number of items under the 28 per cent bracket, the government should also consider reducing the rate from 28 per cent to 20-22 per cent. Another simplification that can be considered is clubbing the 12 and 18 per cent bracket at a more reasonable ranging between 14 and 16 per cent.
The GST suffers due to ambiguities and loopholes that came to light only after its implementation. Some of its provisions seem to contradict the objectives with which these were brought into play. For instance, goods imported into a Customs bonded warehouse and subsequently sold to a customer in the Domestic Tariff Area attracts dual levy of tax. This appears unintentional, but it is imperative that necessary changes in law are made soon.
Flexibility in GSTN
There is very little flexibility offered to users of GSTN. For instance, there is no option to set of excess tax paid by an entity holding the same PAN under one registration vis-a-vis another registration in a different state. The network does not allow filing of returns for a subsequent period till the previous period returns are filed and the penalty, if any, is paid. Resolution of these and implementation of changes on a simple and easy-to-use online portal are imperative for GST’s success.
Industry’s concerns include lack of clarity on the granularity at which anti-profiteering analysis should be conducted. It is not clear whether a company can choose not to reduce the price of a particular product and instead offer an increased quantity or freebies. While transitioning to the GST regime, various costs have been incurred by companies. There is still no clarity on whether such costs can be taken into account while computing a revised, anti-profiteering and tax compliant rate.