GST: Budget Expectations 2020

The calendar year 2019 proved to a mixed bag for GST, with a volley of highs and low’s being thrown at every taxpayer. Now the main centre of focus is the 4th year of GST i.e. 2020. In this article, we will anticipate what business can expect from GST in the ultimate year of the decade. The year 2020 is commencing with the abundance of new reforms like new-returns, E-invoicing and QR code that would saddle the business community with higher levels of compliances.

First and foremost new returns are set to kick in from April 2020 is being considered as one of the biggest changes in the overall compliance framework of GST, as it is expected to change the whole process of filing GST returns. In the new return, the basic structure of the compliance has been kept the same, however, certain changes have been introduced to restrict the flow of input tax credit in case of non-compliant vendors.

Moving to the next reform of 2020, E-invoicing, which would standardize the business communication between the corporates which would help regulators also is balancing the act of tax payments. E-invoicing will streamline the process of input tax credit claim by standardization of the entire process of invoicing. New GST returns compatible with the E-invoicing would make GST compliance invincible, but it is undeniable that in the initial phase businesses would find it arduous to implement. 

The main objective of the compliance level reforms is to enable interoperability across the entire GST eco-system i.e. an e-invoice generated by one software should be capable of being read by any other software. In addition to the above, this new system of e-invoicing aims to make invoice reporting an integral part of a business process and remove the tedious task of invoice-compilation at the end of a return period. Claiming fictitious Input Tax Credit by raising fake invoices is also one of the biggest challenges currently faced by tax authorities. The e-invoice system will help curb the actions of unscrupulous taxpayers and reduce the number of fraud cases as the tax authorities will have access to data in real-time. Although MSME would find it difficult to implement E-invoicing in their billing processes and thereby government has deliberately extended E-invoicing only select taxpayers with a threshold of INR 100 crores or above in phase - I.

Looking at the decreasing GST collection and widening fiscal deficit, the government is brainstorming to find ways to meet the expected GST collections and thereby inclusion of a few more goods and services in the ambit of GST seems to be inevitable. Aviation fuel and stamp duties could be next on the government calendar up for inclusion.

Wear 2019 was a nightmare for the Auto-mobile sector, due to sluggish demand, high GST rates, the emergence of environment-friendly technologies and change in consumer preferences. Country's largest carmaker Maruti Suzuki witnessed over 30% dip in unit sales. This led to the shutting of shops and plants leading to widespread retrenchment of un-skilled and semi-skilled people, this year industry expects a GST rate cut.

Anti-Profiteering is another big concern for the businesses that were benefitted by the implementation of the GST. Till now over 100 orders have been issued by the National Anti-profiteering Authority, without any definite mechanism to calculate profiteered amount under GST. In the year 2020 Government must provide a definite mechanism and proper methodology for the calculation of such profiteering.

New Rule 36(4) was introduced in 2019, which stipulates that a registered person cannot claim the input tax credit, in respect of invoices for which the details have not been uploaded by the supplier in excess of 20%. This new rule for restricting the input tax credit has a significant impact on the working capital of businesses, due to which many of them have decided to stop working with small vendors further eroding the base of the high employment generating sector. 2020 expects that the government would revisit its policies and ensure a guard for small businesses.

In 2020, businesses expect GST to be stable and unambiguous with easing of the compliance framework. It is believed that Tax officers would initiate departmental audits soon, and with piles of data at their back quality audits with high demands are on the way. Beauracracy shall embrace that GST was the biggest change and it is their duty to ensure that taxpayers shall not be harassed for bonafide errors. Government has introduced various measures to rationalise direct taxes for the corporate, however, they also need to rationalise the transactional tax, the burden of which is borne by the public at large.