The Goods and Services Tax (GST) is an indirect tax system replacing multiple taxes like service tax, VAT, central excise duty, etc. The primary objective is to reduce tax evasion, simplify the taxation structure, and make tax rates uniform nationwide. However, like any other reform, everything about GST is not smooth sailing. Business owners face some obvious challenges when making their GST payments.
Let’s explore a few challenges in GST payment and their solutions.
Complex Tax Structure
The complex tax structure is one of the major challenges of GST. The system has various tax slabs and special rates for gold and precious stones. The multi-tax system makes it challenging for small business owners to understand and follow the tax laws. The complex tax structure confuses taxpayers, leading to higher compliance costs and litigation. The best solution is to hire expert professionals aware of the GST rules.
Technology Glitches
The GST payment system requires taxpayers to file online returns using the official GST portal. However, the portal might face technical glitches, making it challenging for taxpayers to file their returns timely. Technical issues might also result in incorrect return filing, attracting unnecessary fines and penalties. The GST Network (GSTN) manages the GST portal and takes several efficient measures to address these issues.
Adapting to the New Software
Most accounting software programs businesses used earlier for return filing had VAT, excise, service tax, etc. The implementation of GST required firms to change their business software either by purchasing GST-compliant software or upgrading their existing program, increasing their cost related to new software purchase and staff training. Choose a reliable Enterprise Resourse Planning (ERP) with a user-friendly interface to overcome the challenge and make the transition smooth.
GST Compliance
Changing over to an entirely new taxation system requires understanding the intricacies. Most businesses still need to learn how to pay GST online, requiring them to hire professionals. While many are worried about filing returns on time, it is more important to issue GST-compliant invoices before that. There are efficient web applications that issue GST-compliant invoices to customers. Business owners can use them to file GST returns through the GST online platform.
Increased Operating Costs
Many Indian small businesses avoid the cost of employing tax professionals. Traditionally, they prefer filing their returns and making GST payments independently to reduce expenses. However, GST is a complex process and often requires professional assistance at the business owner’s expense. Existing businesses also need to buy GST-compliant programs and train their employees, further boosting their overhead costs. Again, GST-compliant ERP software will automatically fetch data from your records to file returns.
Online Procedure
Ever since the implementation of GST, everything has gone online, from return filings to tax payments. While it simplifies and accelerates the process, one major challenge is that many small business owners are not so tech-friendly and lack the resources to integrate a 100% computerised system. While the nation is on its way to going digital, companies in small cities still face technology-related issues.
A cloud-based software program can be the best solution to this challenge. Once the business owners upload their invoices, the program automatically populates the return forms with invoice information. Efficient programs even identify invoice errors, increasing its success rate and timeliness.
Higher Tax Burden on Manufacturing Companies
Small-scale companies operating in the manufacturing industry are struggling with the GST payment system. According to the excise laws, manufacturing companies with a turnover of over Rs 1.5 Crore were liable to pay excise duty. The GST regime has reduced this limit significantly, increasing the tax implications for many small manufacturers. The best solution is to opt for the composition scheme to reduce the tax burden. However, they cannot claim input tax credit after that.
Implementing GST is a significant step towards bringing tax uniformity and simplifying the taxation system across India. However, the transition has not been smooth, as business owners often face problems with GST registration, return filing, and tax payments. While adapting to the new system is challenging, the government has made several steps to overcome the challenges and ensure a seamless GST payment experience.
