#TaxmannPPT | Five Years of the GST Regime

5 Years of GST - Hits and misses June 2022

Agenda

• GST impact and efficiencies • Key areas where government has done well in GST • Government’s recent technology and digitisation drive

• Key issues and concerns within GST Laws • Focus areas for government in the coming year • Key actions taken in the 47th GST Council Meeting

© 2022 Deloitte Touche Tohmatsu India LLP.

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GST impact and efficiencies Digitisation and automation of tax compliances backed by a dynamic and technologically driven indirect tax regime

Removal of cascading effect of taxes that has resulted in reduction of cost of goods / services

GST impact as India completes its 5th GST anniversary

Remarkable centre-state collaboration under the auspices of GST council

Uniform taxation across the country and removal of state barriers helped in optimizing / improving supply chain efficiencies

Competitive pricing of goods and services

Positive impact: A recent survey conducted by Deloitte (wherein 234 CXO and CXO-1 level individuals have participated) revealed that ~90 percent industry leaders view the transition to GST as largely positive. Factors such as competitive pricing of goods and optimised supply chain have benefitted majority of companies. © 2022 Deloitte Touche Tohmatsu India LLP.

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Key areas where government has done well in GST

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Automation of tax compliances, including filling returns

Introduction of e-invoicing/e-way facility, dynamic QR code Timely issuance of GST circulars on contentious tax issues and clarifications

Enhanced engagement with trade bodies and association on industryrelated issues Expeditious sanctions of refunds to exporters

Survey results – a) Automation of tax compliances has been a big win, which has brought major synergies and efficiencies. b) About 59 percent leaders have acknowledged the government’s efforts in proactively issuing instructions and clarification, and streamlining processes, etc. © 2022 Deloitte Touche Tohmatsu India LLP.

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Government’s recent technology and digitisation drive

Insights -

In addition to unifying indirect tax methods, GST was introduced to build an end-to-end, technologybased tax ecosystem to lower compliance burden on businesses and improve the Ease of Doing Business (EoDB) while also curbing tax evasion.

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The government's continued adoption of progressive concepts, such as e-invoicing and establishing GSTN, which is transcoded with advanced analytical tools to leverage taxpayer data, has resulted in positive outcomes for businesses and tax authorities.

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Digital satisfaction levels are perhaps lower for MSMEs in comparison with large and very large corporates due to the restricted availability of resources.

Block-chain, Artificial Intelligence (AI) and Robotics process automation (RPA) are the future of tax technology © 2022 Deloitte Touche Tohmatsu India LLP.

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Key issues and concerns in complying with GST law

Overall input credit management vis-à-vis GST rules

Managing tax disputes

The key issue is the process of matching and reconciliation of ITC claimed with auto-generated data. Notices for mismatches of ITC are regularly shared with taxpayers.

Managing tax disputes is another significant issue for the industry as these disputes can potentially have serious longterm ramifications with respect to both profitability and reputation of the business entity.

01 Keeping track of changing tax landscape and developments Paradigm shift in the taxation system of India. With new developments, such as e-invoicing and other structural changes, industries find it difficult to keep up with the pace of changes.

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Absence of appellate forums The ambiguity and delay in resolution of disputes and the absence of appellate forum to provide clarity on various decisions is undesirable for the industry.

Reversal of input tax credit by the receiver due to non-compliance by the supplier is one of the biggest issues faced by taxpayers since the implementation of GST © 2022 Deloitte Touche Tohmatsu India LLP.

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Key issues and concerns companies experienced so far

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Increased tax regulations and reporting demands from tax authorities

Investment of time and effort in managing GST compliances

Efforts around availing credits with vendors, and record keeping

Dual investigations by multiple tax authorities/ investigation agencies

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Adopting tax positions and implementing specific provisions in the GST law

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Focus areas for the government in the future Insights EoDB changes that are revenue neutral

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▪ Need for increased focus on EODB: - Increased uniformity in the application of the law across states - Resolution of dual investigation by the centre and states

Removal of GST credit restrictions

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▪ ITC legislative reforms: - Removal of credit restrictions - Freeing up of working capital by allowing conversion of accumulated input tax credit into tradeable scrips

Bring legislative changes in ITC provisions by unlocking working capital

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Set up appellate forums for GST matters

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Broad basing of GST to include non-GST products

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Expedite closure of indirect tax matters

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© 2022 Deloitte Touche Tohmatsu India LLP.

▪ Expanding the GST net: With petroleum and power outside the ambit of GST, a large part of the economy is still outside the tax net.

▪ Dispute resolution and litigation management: Setting up of the GST tribunal and evaluating a pan-India dispute resolution mechanism

As per the Deloitte survey, measures to unlock working capital blockage seems to be on top of the list of asks of leaders. This was highlighted across multiple sectors, such as consumer (~80 percent), energy resources and industrials (~73 percent), technology, media, and communications (~73 percent), and life sciences and healthcare (~69 percent).

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Options to reduce continuing difficulties faced by taxpayers

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Allowing the cross-utilisation of CGST credit between GST registrations of the same entity to facilitate unblocking of accumulated ITC

Permitting payment of reverse charge liability through input tax credit

2 Resolving legislative ambiguities to provide relief to taxpayers

© 2022 Deloitte Touche Tohmatsu India LLP.

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Simplification of credit availing procedures and introducing measures to curb tax evasion

4 Clear guidance on non-inclusion of employee cost as part of the common cost crosscharge/recharge

6 Introducing measures to ensure consistency in the approach followed by tax officers across jurisdictions

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Key actions taken in the 47th GST Council Meeting (held on 28th and 29th June) 1

GST rate rationalization to remove inverted duty structure on certain goods/services. Further, formulae for calculation of refund of unutilized credit on account of inverted duty structure also to be amended to include input services also.

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Withdrawal and rationalization of few exemptions such as hotel accommodation, services of GSTIN / RBI.

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Clarification on the GST rates applicable on certain goods/services such as electric vehicles, fly ash bricks, stones, sewage treated water, GTA.

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Few measures taken for trade facilitation, streamlining compliances in GST such as threshold for GSTR-9 for FY 2021-22, no credit reversal in case of supply of duty credit scrips by exporters.

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Clarification / circulars to be issued on: a) issues pertaining to refund claimed by the recipients of supplies regarded as deemed export; b) issues relating to interpretation of Section 17(5); c) perquisites provided to employees; and d) Utilisation of amounts available in electronic cash ledger and electronic credit ledger for payment of tax and other liabilities.

Pending areas: a) GST on Casinos, race-course and online gaming - Group of Ministers have been directed to re-examine certain issues b) Bringing petroleum products, power (non-GST products) in GST c) Formation of Appellate Tribunal – Group of Ministers to be constituted to address various concerns raised by states © 2022 Deloitte Touche Tohmatsu India LLP.

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Thank You

© 2022 Deloitte Touche Tohmatsu India LLP.

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