GST 2020 – How it will change the way you carry your business

Chandigarh/ Keshav R Garg: We are all set to welcome 2020 with a hope that business would witness growth in the next decade. Unlike 2019 when the graph has moved up and down, businesses would be expecting 2020 to bring stability and also brighten the future head. But is it going to be that easy, doesn’t it seem so? 2020 will bring another set of challenges for business and would change the way businesses had been working in India since GST came in.

2020 version of GST will have everything in its kitty, be it increasing compliance burden, overhauling ERP systems, stern audits by tax departments, assessments including search/seizures and top of it complete overhauling of the invoicing and return filing system under GST. The experience businesses have had with GST Network since 2017, surely greys the sky as to how GSTN will meet the plethora of changes the government is likely to make.

Check out how 2020 will change the manner you have been doing your business:

1.     Three annual returns to be filed in the year 2020:

I can’t remember a year since I have come into practice as a Chartered Accountant, where three annual compliances were to be met in 12 months. In the calendar year 2020, businesses would be required to file GSTR 9 (Annual Return) and GSTR 9C (Annual Audit by CA) for three financial years i.e. 2017-18, 2018-19, and 2019-20 with due dates likely be 31.01.2020, 31.03.2020 and 31.12.2020 respectively. Thanks to six extensions of dates made for annual returns for FY 2017-18 which was originally supposed to be filed by 31.12.2018. I won’t be surprised if these dates get further extended looking at the half-cooked return filing utility served by the government after a prolonged wait of two and a half years since July 2017.

2.     New Return formats to be introduced from April 2020:

The government is planning to introduce new return formats i.e. RET-1, Sehaj and Sugam from 01.04.2020. Though the department is making huge efforts in educating taxpayers about the new return forms, it seems that everything has gone in vain. While I attended various such outreach programs, the situation with new return forms was quite miserable. Even the higher rank officers were unable to file a single new return form, while they were pushing the industry to test the trial version of new returns. Instead of simplifying the return filing procedures, new return formats shall pose another set of complications for the businesses. As far as mid and large size GST taxpayers are concerned, integrating the new return formats in their ERP system would become a daunting task. Forget about the small taxpayers who had and will always remain clueless about implementing the behind the doors decisions taken by GST Council.

3.     Changes in invoicing methods:

Looking at how the fake invoice industry has mushroomed, the government seems to be in worry state. This has resulted in the complete overhauling of the invoicing system. For B2C taxpayers it has been made mandatory that the invoice should have QR code embedded on them. I fail to understand how a micro shopkeeper who is struggling to meet his daily needs would introduce IT in his business. Forget about the shopkeepers, does the department itself has a suitable infrastructure to scan these QR codes is also questionable. Even if the industry starts implementing QR codes, how will the government or consumer judge its authenticity is something for which we have no idea at all. For the business having turnover more than Rs. 100 crores, issuing e-invoice shall be made mandatory from April 2020. The government must invite the software companies on board, issue them APIs at least a quarter before. Again forget about APIs, the ten e-invoicing portals which the government has notified are not functioning. I won’t be surprised if the dates for e-invoicing are further extended due to a lack of IT infrastructure.

4.     New GST Rates to be enforced:

Department may issue bold statements, but with the huge amount of refunds being stuck, difficulties in releasing budgetary support and eagerness of the government to plug tax leakages are all indications that there are some serious issues with Exchequer. This has forced the GST council to rethink and ponder over the rate of taxes. If rumors are to be believed the government is planning two rates 10% and 20% for GST. Further levy of GST on luxury healthcare treatment and other exempted goods/services are on the cards. If the new rates are imposed, it will certainly unsettle the settled business. Most of the industry especially pharma which had been vouching on inverted duty structure refunds would have to rethink their business strategy. Not only pharma but even the service industry which is presently charging 18% would also be forced to either charge more from the consumers or pay from their pocket. The rejigging of rates is uncalled for as it will pull down GDP further due to bad business sentiments.

5.     Stern Audits to be carried out by department:

As the government is propagating that the honeymoon with GST has ended. The business must pull up their socks for the audits which department is going to carry during 2020. As a consultant myself, I feel that the department is silently preparing behind the doors to bombard the taxpayers once their boss shows the green signal. Loss of revenue, pending compensation from the central government, has increased the urge of state GST authorities to suck the nectar to the last drop. Since 2017, taxpayers were on the cakewalk with no interference by the department, but things will certainly change in 2020. Time is not far when the taxpayers indulging in malpractices would have to compensate for wrongdoings.

6.     Assessments by the departments:

Once the taxpayer files his annual return, hopefully in 2020 only, the department would carry out assessment proceedings on them. This will bring another plethora of litigations including classification issues, eligibility of Input Tax Credit, non-payment of interest, etc. for the taxpayers. 2020 will not be an easy year for both the department and taxpayers. But work for Lawyers, Chartered Accountants, and other professionals are certainly going to increase manifolds. I hope that at least in the GST regime, cases would be decided on merit basis and businesses will understand and value the job carried out by their consultants.

7.     New reconciliation to be made in 2020:

The government has restricted the Availment of ITC in respect of invoices not reflected in GSTR 2A up to 10% of the eligible credit reflected in GSTR 2A. The businesses would be expected to make a monthly reconciliation and also satisfy the department about the Availment of the input tax credit. This additional compliance will commence from 2020 itself, as the new provision comes into force from January 2020. The claim of the input tax credit shall become another point of difference between departments and taxpayers. With substantial powers given to tax officers vide Rule 86A of CGST Rules 2017, taxpayers will have a difficult time in proving the genuinity of their claim of Input Tax Credit.

8.     Levy of late fees for delayed filing of GSTR 1 from 2020:

Though the late fees on delayed filing of GSTR 1 were part of the Act since 2017, GSTN had never charged it on the taxpayer. It has now been cleared that from January 2020 onwards, a late fee of Rs. 50 per day shall be charged on the delayed filing of GSTR 1. The taxpayers who had remained under the impression that there are no late fees on GSTR 1 must wake up and ensure that they not only file their return in time but also with correct details. The new set of penalties would force the wilful defaulters to mend their habits.

9.     Ease of Business for Start-ups:

The government is all set to introduce a new set of reliefs for start-ups. There had been substantial relaxation on income tax front but no specific relief was given in GST. There are discussions that the Government would further relax the compliance burden on the new businesses. Simpler registration form, simple returns, tax exemptions from GST is likely to be announced in Budget 2020. The way start-ups have dealt with GST since 2017 would certainly change.

10. Single window for a refund to exporters:

A prolonged demand of the exporters to form a single window for clearing their refunds might get fulfilled in the year 2020. The government had been under tremendous pressure due to delays in the GST refund for the exporters. The dual GST regime was the main cause of the delay in refunds. There is a huge possibility that a single-window i.e. the assessment and payment of the refund by the same authority can get introduced. This shall come as a huge relief for the industry. But on the other hand, they would expect the government to clarify the burning issues such as intermediaries, etc. which has stalked the foreign subsidiaries since GST has been implemented.

Though 2020 will a beginning towards a new decade, the journey for business, especially in 2020, does not seem to be smooth. Another set of confusion, anxiety, debates, and litigations are waiting for them.

Never the less, what might happen, one should strive to meet all odds and thrive towards victory. Wishing you a very happy and prosperous new year ahead.