Teething troubles: Confusion, fear among traders as they face problems in migrating to GST

The Goods and Services Tax Network (GSTN), the IT infrastructure provider for GST, was supposed to take invoice uploading services live from July 16. It has deferred the plan to July 24. GSTN Chairman Navin Kumar says they were not very confident about the preparedness of GST Suvidha Providers, or GSPs, facilitators for uploading invoices/returns on the GSTN website.

GSPs, however, say that GSTN has neither provided them updated APIs (Application Programme Interfaces) nor MPLS (Multiprotocol Label Switching), a technique to carry data from one network to another. While they admit that initial hiccups were expected due to the complexity and enormity of the job, they also say that GSTN does not have sufficient staff for such a big task. An executive of a GSP said on condition of anonymity - he even says that GSPs have been asked to not talk about their problems - that GSTN is not only short-staffed, it also lacks quality personnel. He says the GSTN leadership has been unable to get bureaucracy to do things. The managing director of another GSP also said, requesting anonymity, that they have not been provided the latest APIs.

The prevailing view is that the GST rollout has been more or less smooth so far. But a close interaction with users and intermediaries involved in the implementation reveals that this is not completely true. Even as the new system is about to complete one month, the problems, say users, have just started pouring in - be it technical glitches, understanding of the new laws/procedures, or taxpayers' reluctance/apprehension. And all this when some of the biggest milestones for shifting to the new system - start of invoice/return uploading, tax payments, refunds, etc - are yet to come.

The Troubles

GSTN has set up a 300-people helpdesk that is getting as many as 20,000 calls a day. Kumar says they will add another 100 people within a week. So, what are the most common issues faced by complainants? "Many people are having a problem in logging in. Some say they have forgotten their password, some say they have forgotten their security password, some say their advocate has taken their security password." While forgetting the password is a small issue, the security password is serious business. "The person has to approach the tax department, which verifies that he or she is the right person. Resolving the issue could take four-five days," he says.

Getting digital signature approved is also a cumbersome task. Kumar, too, admits that it is a bit tricky. "You have to download a software. Then you have to register your digital signature certificate on the portal. We have given these procedures in detail. We have also put up a video on our website showing how to do it. You will not be able to do it if you don't follow the detailed instructions," he says.

An executive of a GSP says GSTN has not done the testing of the procedure and that is why these problems are cropping up. Digital signature is mandatory for companies and limited liability partnerships or LLPs. Others can use the electronic verification code generated with the help of a one-time password sent on the verified mobile number.

Other Blues

Some taxpayers are facing a problem in migrating to GSTN because of non-validation of PAN (Permanent Account Number). "The registration is PAN-based, and PAN is based on the nature of the business. Many times, one gets registered as a proprietor but later opts for the LLP structure without changing the PAN. We sent whatever data we had to GSTN based on which we got user ID and password for applicants. However, in many cases, the quoted PAN did not match the company's name, delaying the migration," says H. Rajesh Prasad, Commissioner, VAT, Delhi. He says in Delhi, 3.32 lakh traders and businesses have migrated to GSTN but around 70,000 are yet to do so. He says many businesses had registered themselves under VAT despite being below the `20 lakh threshold. Many of them are reluctant to come into the GST fold due to stricter laws.

But the biggest problem that traders and small businesses are facing is determining the HSN code and, hence, the tax rates of commodities. HSN, or Harmonised System of Nomenclature, are globally accepted codes for different goods. These are crucial for levying the correct tax on a product and have to be mentioned in invoices. While manufacturers (paying central taxes such as excise and customs duties) were using HSN codes earlier also, for traders (paying taxes to states), it is a new concept.

"People are confused about the rates. The rate schedule is very detailed. Traders were out of excise duty and so are not conversant with it. For a common person, it can be a little difficult in the early days," says Dhanjay Akhade, Joint Comm-issioner, Sales Tax Department, Maharashtra.

To make things easier, the government has made the HSN code simple for most traders. Rajeev Yadav, Commissioner, Central Board of Excise and Customs, explains: "These are eight-digit codes but those with annual turnover of up to Rs 1.5 crore need not quote them. Those with annual turnover of Rs 1.5-5 crore have to quote only two-digit HSN codes while those above Rs 5 crore have to quote only four-digit codes." He says despite this, the traders are facing a problem in determining codes for their products.

Some people say they have forgotten their password, some say they have forgotten their security password, some say their advocate has taken their security password. Navin Kumar, Chairperson, GSTN. [Picture: Vivan Mehra]

"There is also confusion and fear among traders due to change in jurisdiction. Under GST, central tax officials have jurisdiction over traders who were paying VAT and state tax officials can now administer excise and service tax payers," he says. He says traders, mostly used to dealing with state officials, are reluctant to meet central officers to clarify doubts.

The format (or lack of it) of invoices is another area of concern. Shyam Kedia, CEO, GST Suvidha, says traders are confused as the government has not given a format for invoices. It has only mentioned nine mandatory fields - invoice number, date, HSN Code, tax rate, etc. Traders are retailers are protesting that this will make the process of raising invoices cumbersome. The Retailers Association of India has written to the finance minister on this. "The format is not only increasing the size of the invoice but also confusing people. There is a lot of information that is not relevant to end customers as they will not be claiming input credit on the GST paid," it said in the letter.

Well Begun

Some initial hiccups were always expected during such a huge changeover. The government, on its part, has been proactive in ensuring that the rollout of GST is smooth and does not lead to speculation, panic or profiteering. It has put all its energy and might in checking rumour mongering, clarifying ambiguities/confusions, and resolving taxpayers' issues. It has set up facilitation centres in all sales tax and excise offices, organised interactive sessions with industry and traders and come out with timely FAQs to clear confusion.

"We have undertaken a large number of awareness campaigns which have been widely attended and well received by taxpayers. The CBEC has issued FAQs and formed sector groups, some of whom have come out with their reports. We expect our officers to be not only well conversant in GST law and rules but also be ready to handhold industry in registration and filing procedures," Vanaja N. Sarna, Chairperson, Central Board of Excise & Customs, said at a recent GST session organised by the CII.

All state sales tax departments have conducted training and outreach programmes, sometimes on their own and sometimes with the CBEC. Akhade says they have conducted 500 training sessions for trade associations in Maharashtra. "We have set up facilitation centres and helpdesks. We are receiving calls from across the state. We have developed a mail on Google Drive where stakeholders can put questions. We have formed eight committees that pick up their subject and respond accordingly," he says.

We expect our officers to be not only well conversant in GST law and rules but also be ready to handhold industry in registration and filing procedures Vanaja N. Sarna, Chairperson, Central Board of Excise & Customs.

The Delhi VAT Commissioner says they get 40-50 people in the facilitation centre every day. He says he himself attends two-three events/meetings daily in his office and outside to keep abreast of taxpayers' issues. He says the sales tax department has conducted more than 50 outreach programme with traders' associations.

However, these efforts are running into unexpected challenges. After reports of unscrupulous elements trying to fleece shopkeepers and customers, the finance ministry has barred tax officials from paying unauthorised visit to any business premises. Yadav of CBEC says they do not want such issues and, therefore, don't want officials to visit traders or businesses even to help. "So, we conduct these events with traders bodies," he says.

Let's hope all these niggling problems are sorted out soon so that the country can celebrate the success of the GST rollout.

@dipak_journo