Most discussions around the goods and services tax (GST)
have so far been confined to the basic aspects of the new levy, thus,
overshadowing some of the finer points of GST implementation. Take, for
instance, the need for realigning, or at least revisiting the administrative
machinery of the government and taxpayers to prepare for GST.
Various factors under GST would have a bearing on the
administrative aspect of taxation. For example, certain
sectors such as aviation and real estate that are
outside the indirect tax net could be brought under the
purview of GST, thus requiring companies in this sector
to gear up their tax function.
At the government level, the central government deals
with around one million taxpayers, while the states
administer more than 7-8 million taxpayers. In keeping
with the GST principle of widening the tax net, if the
central government were to expand its taxpayer base to
7-8 million — or maybe even more — then the government
would have to look at large-scale recruitment.
Also, the central tax collection agencies have
negligible experience of dealing with the trading
community for indirect tax matters. Similarly, the state
tax authorities have no expertise of administering
service providers that are required to pay only central
service tax. Therefore, one would hope that before GST
implementation, there would be training sessions to
groom tax officers for the new levy.
Thus, it is apparent that under GST, unless a suitable
model is evolved for maintaining status quo for tax
administration, both authorities as well as taxpayers
are in for a big challenge. While these issues are
likely to be ironed out over a period after GST is
introduced, an administrative setup that absolves the
taxpayer from such challenges in the first year itself
would be welcome. This would require careful
consideration and, perhaps, some compromises by the
Centre and states.
For instance, the Centre may relinquish its right of
administration over the traders who interact only with
the state authorities. Any CGST payable by them may be
collected by the state authorities, on behalf of the
Centre. Similarly, the service providers may be required
to pay SGST to the central tax authorities, who would
then pass it to the respective states. A similar
arrangement is contemplated even under the existing
Customs Act (Section 6), which entitles the central
government to entrust any functions of Customs
authorities to any officer of the state government or
local authority.
This seemingly simple administrative model also has its
own set of challenges. First, it can work only if CGST
and SGST provisions are aligned to a significant extent,
and the tax officers are not required to put in extra
efforts to understand both the laws. Also, the mechanism
for empowering (and motivating!) the central tax
authorities to assess taxpayers for SGST dues, raise
demands, impose interest/penalty, etc, and vice versa,
would need to be evolved. Clearly, this remains an
essential preliminary while introducing a unified GST.
The HR teams of taxpayers too would have a tough task of
realignment and reorientation of some of their
employees. This is especially relevant for companies
that are brought under the tax net for the first time.
Such companies would need to create new tax positions,
hire more people and train them for a new tax on which
they have not worked before.
In a manufacturing setup, excise managers at the factory
would also need to undergo extensive training to shed
the excise duty legacy and gear up for GST. This is
because most of the concepts under excise — such as
taxable event, valuation provisions, related party
transactions, etc — are likely to witness substantial
changes under GST.
Similar issues would arise with respect to increased
burden on tax managers who currently deal with only one
tax authority, but are required to deal with both
central and state authorities under GST. A telecom
company, for instance, may need to recruit more tax
professionals at the regional level to deal with the
state authorities on SGST. In fact, such service
providers may also be required to go for state-specific
or regional registrations and computations for CGST
purposes if the concept of centralised registration is
discontinued under GST.
Apart from training the tax team, some informative
sessions would also be required for other business
functions within the organisation, such as finance,
markets, IT, and senior management.
To conclude, GST is not only going to impact the
finances but would also affect several other activities
of companies, including human resource management. In
order to ensure a smooth transition to the new regime,
organisations would need to assess the overall impact of
the new levy on all facets of business and carry out
requisite changes in a timely manner. For a successful
implementation, clearly, the administrative aspects of
GST would need to be taken care of by both the
government as well as taxpayers.
