What needs improvement:
- Unregistered vendors reverse charge: The government probably imposed this rule intentionally to force small vendors to register anyways to avoid pressure/blacklisting from their registered suppliers. However, awareness campaign has been deficit (for example, 20lakhs limit not applicable to interstate suppliers), thus leaving the education job to a short staffed companies
- Lack of Official Tariff :The government has given PDFs at 4 level code while leaving a 18% residuary clause, thus throwing open the GST rate classification of several items.
- No harmonization in HSN/SAC: Depending on turnover, vendors have option to cite 0/2/4/8 digits of HSN code on the invoice. This poses a challenge for ERP system validation rules, as also reporting of procurement.
- Lax merger framework: In an invoice level matching framework, there is no changeover period applicable for merger/amalgamation. This is posing challenges
- Delay in Registration allotment: The registration window closed on 31 Mar 2017 and reopened on 1 Jun 2017. For those who delayed new registration(NOT migration) pending the release of final rules, they had only a week to take fresh registration.
- Automated matching of PAN not allowing for exceptions: Imagine trying to update your GSTIN name(Core field) while PAN is still under old name. This would throw up an exception not allowing you to proceed, and resolve issues offline
The good points:
- Twitter Page for queries: One can directly tweet the government their queries on GST, and await responses
- Extension of timelines: The return timelines have been extended due to lack of readiness of Government IT infrastructure.
- ICAI education: The Institute of Chartered Accountants of India has released lots of high quality material on its website free of cost. This is really a great public service.
From a systems perspective, several challenges emerge due to the large number of exceptions. For example, the following rules breakdown
- Place of Supply=Place of Customer: It is possible that for certain vendors
- Vendor Tax Status change affecting the past invoices: If the vendor GST registration is pending allotment
- One GST Rate for One HSN: There are options in services for different tax rates basis non GST parameters(eg hotel room rental decides whether 12% or 18%, similarly existence of AC in the restaurant determined the 5%/12%18%, also whether vendor wishes to take ITC determines 5% or 12% for rentacab).
- ITC eligibility linked to HSN Code: It is not possible to define ITC eligibility at item level also by HSN code, so one needs to do tax configurations at a much more detailed level. For example, plastering services may be generally eligible for input credit, but not if used for immovable property construction. Therefore, one may either need to define a custom GST status, or else manually edit this.
The first returns cycle due on 20th Aug 2017(simplified) and 25 Sep 2017(full) will prove the robustness of the IT infrastructure and whether it will crash like the income tax efiling site.