India’s largest tax reform, the Goods and Services Tax, was launched on July 1 but is yet to be fully put in place, thanks to patchy technical implementation. Systems underpinning the tax have been plagued with problems, resulting in deadlines in the filing of GST returns now being pushed to October and beyond. On Friday, a five-member panel of ministers, under the chairmanship of Bihar Deputy Chief Minister Sushil Kumar Modi of the Bharatiya Janata Party, met to discuss the problems businesses are facing in filing their GST returns.
The Goods and Services Tax subsumes all indirect taxes that businesses earlier paid the Centre and states separately, with the aim of creating a common market. But it also involves a complete overhaul of the tax filing system, forcing traders to use a new filing software that has failed to deliver. Modi reportedly said on Saturday that the task of fixing the new Goods and Services Tax portal was like building a ship while sailing on it, and urged businesses not to wait until the last minute to file their returns.
Businesses must file their GST returns using the websites and mobile apps run by the GST Network, the non-profit, non-governmental entity responsible for the rollout of the tax. The panel of ministers plans to meet every 15 days to examine the functioning of the network, and Modi has said he expects 80% of the problems in the system to be solved by October 30.
But businesses remain sceptical and anxious about persistent problems in the Goods and Services Tax portal.
Failure to log in
Many have reported difficulties in logging in to the portal and filing their returns, said Rahul Mehta, president of the Clothing Manufacturers’ Association of India. “There are many technological issues in the network such as the logging-in problem,” he said. “Some traders who have transitioned to GST and have received their temporary numbers to log in are unable to do so because the network is busy.”
He added that while most users manage to access the portal after a few attempts, the process can sometimes be delayed by three to four hours because the network is overloaded.
Another problem reported by traders is of the online system declining their returns despite fulfilling the specifications laid down in the Goods and Services Tax rules. This month, people took to Twitter to complain that they could not file their 3B returns as the portal returned an error saying “invalid return type”.
The 3B return is a simplified return form introduced for the months of July and August in the wake of problems users faced in uploading their actual return forms. This return allows businesses to file a summary of their sale and purchase invoices without having to upload each invoice separately as an invoice-level return, known as GSTR 1, according to the new guidelines.
While the Goods and Services Tax’s Twitter handle, which is receiving multiple complaints every day, acknowledged the complaints, there has been no solution so far, at least officially.
Design bugs in the GST software has added to problems, said Harpreet Singh, partner, indirect tax, at the tax and advisory services firm KPMG. Singh said many problems were evident during the launch of the Goods and Services Tax and the firm expected these to be fixed with the appointment of the ministerial panel. “There are many such implementation issues which are there in the system but you will have to wait till the new upgraded system kicks in to see which ones remain,” he added.
Singh noted one problem relating to credit notes – which are an acknowledgement that a business owes its client money that can be offset against future purchases. Singh said that in its current form, the portal only allows one credit note per invoice and vice-versa, even though that is not the way many businesses function. “Most multinational companies issue multiple credit notes per customer per invoice but the GST portal just doesn’t accept it yet,” he said.
In Swarajya magazine, Aashish Chandorkar wrote of another problem: the portal often deletes data already entered in the forms if people move to another screen to verify something. He said, “For example, if a user is checking input credit [tax credit available from purchases made by a business to produce the final credit] from one supplier and wants to check the GST numbers of suppliers to understand which supplier this input credit belongs to, it is not possible to do so without losing already keyed in data.”
Deadlines pushed back
As the government scrambles to fix these glitches, the Goods and Services Tax system has also failed to support the last-minute rush in filing of returns, as a result of which deadlines are being extended continuously.
“Owing to the huge rush of GSTR-3B return filing on the penultimate date of the month, the GSTN [GST Network] software witnessed glitches,” Modi acknowledged on Saturday. He said that only around 3 lakh dealers had filed their 3B returns for August, with five days to go for the deadline, against 46 lakh people who had filed returns in July.
Almost all other return deadlines have also been pushed back, creating confusion among businesses. The deadline for GSTR 1, a compilation of all sales invoices generated in a month by a business, has been moved from August 10 to September 5 and finally to October 10 now.
GSTR 2 is filed to match a business’s purchases to its supplier’s sales and calculate claimable input credit. The input credit can be claimed by the business as an offset against the tax it is required to pay the government. The GSTR 2 deadline, too, was moved initially from August 15 to September 25 and then extended to October 31.
Meanwhile, GSTR 3 for July – which finalises the tax payment by a business based on its sales and purchases during the month – can be filed till November 10. This return was earlier to be filed by August 20 and then by September 30 before the deadline was extended again.
“In some ways, it is an admission by the government that the portal needs more work and hence they are allowing people to file later,” said Archit Gupta, founder of Cleartax, a registered GST suvidhaa provider. The GST suvidhaa providers act as intermediaries between the government portal and the end users, allowing them to file through their software.
“The government is clearly moving fast on this and we should see some resolution in the coming days. If the actual issues are fixed on priority then it will be a big boost to the businesses which are struggling right now,” he said.