Delhi’s Desh Bandhu Gupta Road, in the heart of Karol Bagh, is as typical an Indian trading hub as can be. And ever since GST was rolled out, the new tax is the central theme of any conversation that a buyer strikes up with a seller. And in the midst of this tsunami that’s hit the trading business, both literally and figuratively, is the seat of Confederation of All India Traders (CAIT)where Sourcing Hardware met its secretary general Praveen Khandelwal (firstname.lastname@example.org) for this exclusive interaction.
By Gyanendra Kumar Kashyap
“It has been a long and arduous task to convince various stakeholders to come to a decision that will benefit the entire country. And I believe that henceforth, GST will be a guide to doing business in India,” says Khandelwal, one of the leading evangelists of the new trade tax system in the country. A vocal supporter of tax reform, Khandelwal cut his negotiation teeth during the tumultuous transition to value added tax nearly a decade ago. Being CAIT’s key pointspersonfor carrying the representations of all its constituents to the government, he honed his skills in consensus-building through reasoned discussion amongst the trade and government. “I have greatly benefited fromthose days; that journey provided me with the opportunity to learn about the nuances of policymaking and taking the stakeholders on board.” Unperturbed by incessant calls on his cell phone from people across the country seeking clarifications or requesting him to speak at a seminar, Khandelwal shares insights about how trade is likely to transform in the near future.
GST & CAIT
As secretary general, Khandelwal has helped shape CAIT into a highly responsive and media-savvy body that plays a constructive role in assimilating as well as disseminating information. To this end, CAIT has taken a big leap forward in its attempt to train and educate the trading fraternity on GST compliance and adoption of digital payments. It launched a national campaign in May this year in association with MasterCard, HDFC Bank and Tally Solutions under which market camps, seminars and workshops are being organised in close vicinity of small traders across the country. “CAIT has also launched Digi Varta national campaign including Digital Rath, to help small businesses and the trading community rapidly adopt digital payments. These are intended to help traders’ transition towards the GST regime,” informs Khandelwal.
CAIT will organise 100 GST Clinics across the country to acquaint traders about the new indirect tax regime. The endeavour, says Khandelwal, is to reach out to six crore traders.“The first phase of the nationwide awareness campaign began on 1st July; the campaign will help the traders’transition smoothly from the current tax to GST.” The clinics will inform businessmen about the fundamentals of GST, the role of technology in its compliance, requisite information about mandatory compliance obligations, linkage of digital payments with GST, and the changes required to make operations compatible with its provisions.
A large number of traders across the country still remain unaware about the basic fundamentals of GST including the compliance obligations; this has led to a situation of utter confusion and unnecessary panic, and GST Clinic will ease the situation. To further the awareness, CAIT has releaseda ‘GST White Paper’ consisting of all the important aspects of the tax and its compliance. Khandelwal explains the significance of the initiative, “A large number of traders are still unaware about not only the basic fundamentals of GST but even the compliance obligations.”
While there have been reservations and protests, Khandelwal is very upbeat about the new tax. “GST will widen the tax base, and going forward the first positive implication will be on income tax,” he says with confidence. He explains that with widening of the tax base, the share of government revenue from indirect tax will increase; as a result the government would be more than willing to pass on the benefits to individual tax payers. “As of today there are 8 million assessees enrolled under GST, and this figure will in all likelihood touch 20 million in the next one year,” he says, with data ready on his fingertips.
The focus of the government, Khandelwalsays, will now be on expenses and with technology playing an integral role, the days of manipulation are gone. “The various initiatives that the government has taken are directed towards an era of efficient business. GST has brought equality in business,” he says.
GST will be a complex structure of taxes and CAIT has put across its views and asked the tax department to exempt traders from penalties in the transition period of first three years. Speaking for his fraternity, which is not too tech savvy, Khandelwal says, “We demand an interim period of nine months – July 2017 to March 2018 –when no penal action may be taken against any trader for procedural lapse. However, tax evaders or willful defaulters may be dealt with in accordance with law.” There must be incentives for quicker adoption, he suggests.
He, however, makes clear that the protests being organisedin the textile domain are uncalled for. “Textile retail accounts for 40% of the entire trading business,” he informs, adding that while the government is ready to listen to their grievances, resorting to bandhs and protests does not serve any purpose. It is impractical to have a large chunk outside the tax net. “The GST rule is very clear on this; if your turnover is below Rs 20 lakh you do not come under GST, and traders who have turnover below Rs 75 lakh will have to pay 1% tax.” The Rs 20 lakh threshold is for those who are not engaged in inter-state supplies.
Areas of Concern
While happy with the broader aspects of GST, Khandelwal has been making representations to the government on the aspects of rationalisation and simplification of procedures. This, he feels, will enable the traders as well as others to come under the fold of GST. “I am in constant touch with the ministry and related departments, and have been making a point to reduce the anomalies in rates, and have been advising them to take up mass outreach programmes through trade associations, to educate the concerned stakeholders on HSN, RCM and input credit.” He says that he has conveyed his skepticism over the e-way bill, since in the long run he believes it could prove to be counter-productive. “The concept of e-permit in inter-state transactions will destroy the idea of ‘one nation-one tax’. Since each activity will be linked through the GST network and enable the government to keep a close watch on every movement of goods and services, the provision of e-permit is actually redundant. If the transaction is already under the scanner, then where is the need for e-way bill?”
There are anomalies in various tax slabs that should be addressed by the Council. “Anomalies, disparities and contradictions do exist in various tax slabs under GST and as such they need to be reconciled.”As for the goods and services placed under the highest tax bracket, CAIT has sought a review of the decision to place certain products and services under the 28% slab, and for simplification of procedures to promote voluntary compliance. “The slab of 28% requires a re-look as many of the items falling under this slab ought to be placed under other lower tax slabs.”
High Rates for Building Products
CAIT is certainly not pleased with the idea of having builders hardware products in the 28% rate-slab. Khandelwal says that the structure needs to re-categorised based on end-consumer use. “Look at the architectural hardware products, they have been placed under the 28% rate-slab; it defies logic,” he says, adding that the initial proposition was to put luxury goods and demerit goods in the 28% slab. “As an industry body, we are going to place before the government our argument that including hardware products in the highest rate-slab is against the basic structure of GST,” he shares. “I am confident that the government – which has its doors open for grievance redressal – will listen to our demands and do the needful.” He is clear that the industry as a whole needs to get together and make a joint representation.
As an association, CAIT had favoured early implementation of GST in the country. However, it has also urged the government to give reasonable time to traders to understand the provisions and prepare themselves for smooth transition from VAT to GST. It is in this context that CAIT had put forth the view that the deadline of 1st July 2017 be deferred for a reasonable time, and meanwhile a nationwide mass awareness campaign be conducted involving trade associations from all over the country.
Khandelwalreveals that nearly 60% of small merchants are yet to adopt digital technology in their business format, and as such it is a big challenge for them to go digital in a shortperiod. “But eventually as much as 90% of the business will go online, leaving little scope for unaccounted transactions.”
Technology a Challenge
The preparedness for GST remains a major challenge as traders are largely ill-equipped in terms of technology, which is a pre-requisite for compliance.“Nearly 60% of small businesses in the country have been devoid of digital technology. So the challenge is that when everything is being routed through digital, how will this large number of traders comply.” He suggests that till the time traders are equipped with technology, some interim measures be adopted to help in compliance.“We recommend provision of subsidy or incentive to traders in smaller towns for transition to GST taxation system, since they are required to invest their time and money in faster adoption of technology-led practices and accounting procedures.”
Khandelwal shares that in his interactions with the ministry and other related councils, CAIT has suggested that trade associations be designated as GST facilitation centres, and computer kiosks be installed in commercial markets to enable traders comply with GST by paying a nominal fee for their usage.“We have also advised trade associations to form clusters of 30-50 traders each, and connect themselves with an accounting professional who can assist in compliance.”
Taking Stakeholders on Board
In the meantime, he says, the government must increase its interaction with the trading community to dispel myths regarding the system. Since GST is a destination-based taxation system and traders are the last mile connect with consumers, their views will go a long way in establishing GST as the best revenue model for the country. “A major campaign by the government for direct interaction with traders at district level is the need of the hour, to dispel confusion and provide authentic answers to their queries to facilitate compliance with GST procedures.” It will be pertinent if GST committees are formed in each district comprising of tax officials and representatives of trade, to monitor adoption, he suggests. “To see to it that GST is a success across the business spectrum, interaction with the business community should be a focal point.”
Time to Stabilise
“GST will take a minimum of a year and a half to stabilise,” says Khandelwal, implying that since not many in
the business domain are tech-savvy, it will take time. He is aware of the challenges that accompany any radical policy decision. “There is always resistance to change. What we need is to prepare people for the change; the vision should be to provide a conducive environment for change. But if things are done properly, I firmly believe that the true impact of GST will be felt by the beginning of the next financial year.”
Hinting that technology will be a great enabler and businesses will become more structured, he adds, “Technology will put an end to inspector raj; human interface will be reduced, and there will be tax compliance through technology. The life of the trader will be much more relaxed. What’s more, he would be able to monitor his business from anywhere as he would have all the data on his fingertips!”