July 1 came and GST is now a reality. The amount of time we have waited for this should only do justice for the country and its people, both in terms of ease of compliance and also lowering the tax rate in the long run. Another big hope the government is banking on is that GST would increase the tax base, which could potentially lower the tax rate over a period of time, and also increase consumption.
Such amassivetax legislation will fail to take off unless the Bottom of the Pyramid(BOP) embraces it effectively. And for the BOP to embrace it, the cost of compliance should be cheaper than cost of non-compliance. If the cost to comply becomes high, they would try and find ways to stay out of the tax net. Here, the SMEs become the effective BOP sincethe government is resting a large part ofits gamble on them.
Let’s look at some ballpark numbers here. We are talking about 80 lakh returns being filed in the first month. Of all these, we probably have 25,000 to 50,000 at maximum having systems in place, and also have professionals on board who should be able to guide them through to file their returns. Predominantly most of the others are dependent on outside support of Tax Return Preparers(TRP), who could be their Chartered Accountants or someone qualified to help.
If you look at large corporates, they are covered or at least they will ensure they will be covered. The bigger issue is going to be with the SME, which leads to a few questions:
A lot of such things come to mind; however this is reality now and we need to deal with it.Let’s look at what the on-ground situation is.
Having said all this, it is still a reality. By far this is the largest legislation that India has gone with. It is our bounden duty to make this successful, since anything less will have huge ramifications for the country. Let’s bear the pain for a while and hope that things fall in place.
The author is founder & CEO of KayEss Square Consulting Private Limited (email@example.com), a GST and direct taxes specialist.