May 7, 2018 @ 2:00 am

7 MAY 2018

GST’s complicated

The new compliance system and a proposal for cess on sugar send the wrong signals

With collections from the goods and services tax peaking at over Rs. 1 lakh crore in April, industry hoped the GST Council would make life simpler for an increasingly compliant tax-payer base. Indeed, at its meeting last week the Council decided to introduce a new compliance system under which a single monthly GST return will have to be submitted by firms, barring a few exceptions. However, this will only be done in a phased manner — with the first of three transition stages to begin six months from now. Discussions over simplifying GST returns have been under way for months and considered by the Council, a committee of officers and a Group of Ministers. Nandan Nilekani, chairman of Infosys Technologies, the firm in charge of the GST Network’s IT system, has been consulted. Yet, the solution offered has gaps. For instance, in the second stage of the transition to simpler returns, buyers will get provisional input credit even if the seller doesn’t upload the invoices. While this could lead to disputes, in the third stage input credits will only be granted after sellers upload invoices. If a seller defaults on depositing GST dues collected from a buyer and remains evasive, the authorities can reverse the credit availed by the buyer for such outstanding taxes.

In any case, the timelines for the transition are long and bring fresh uncertainty for businesses still recovering from the initial jitters and confusion around the tax regime. Firms will again have to cope with significant changes in accounting software in the middle of the financial year. The Council, credited with swift and significant course correction in GST processes in its initial months, could have done more. The most troubling is the Centre’s push for the imposition of a cess on sugar over and above the 5% GST levied on it. A cess at the rate of Rs. 3 a kg is proposed to alleviate ‘deep distress’ among sugarcane farmers. Not surprisingly, this faces opposition from several States. It has been rightly argued that this will burden consumers while favouring larger sugarcane-growing States like U.P. and Maharashtra. In addition, a special sugar cess will signal a looming breakdown of the basic tenet of GST: the abolition of such cesses and surcharges, barring the compensation cess for funding States’ revenue losses for five years. Along with a proposal to reward digital GST payments, this has been referred to new ministerial groups, which are to revert in a fortnight. Lastly, thedecision to make the GSTN a 100% government-owned firm, instead of the present structure with 51% private ownership, explains neither how this will address data security concerns nor the impact on the Network’s functional efficiency, which was the original stated intent for giving private players an upper hand in operations.

Mahathir’s challenge

Will the corruption scandal be the undoing of Malaysian Prime Minister Najib Razak?

Malaysian Prime Minister Najib Razak has many things going for him in the May 9 general election, but whether they will suffice in the face of a corruption scandal is an open question. With the economy growing at 6%, helped along by lavish infrastructure spending, Malaysia’s overall outlook could not appear more robust. But Mr. Razak’s opponent and erstwhile mentor, the 92-year-old former Prime Minister Mahathir Mohamad, is hoping to exploit the incumbent’s links to a billion-dollar corruption scandal in a state investment fund. The battle lines have been sharply drawn, but there possibly exists an advantage for the ruling Barisan Nasional (National Front), led by the United Malays National Organisation, insofar as it has had a long record in office. Also, almost 70% of the population are bumiputras, mainly Malays and other indigenous groups, that have traditionally voted for the UMNO. This group has benefited significantly over the years fromMalaysia’s policy of according preferential treatment to it in terms of access to education and government jobs.Parliament’s recent approval of the redrawn electoral constituencies has reinforced allegations of gerrymanderingand unequal sizing of electoral districts to benefit the National Front. The conduct of polling on a week day has led to allegations that this has been done to deter a large number of citizens working in neighbouring Singapore from casting their votes — it is believed that a lower turnout will work in favour of Mr. Razak’s party.

The election campaign has seen an estrangement between one-time allies and a coming together of former foes. Mr. Mohamad, who has returned to frontline politics as the incumbent’s principal challenger, was instrumental in the installation of Mr. Razak. He was also once the arch-rival of the man he is standing in for, Anwar Ibrahim, the imprisoned leader of the opposition Pakatan Harapan (Alliance of Hope). Uncomfortably for the Prime Minister, news that some $4.5 billion had gone missing from a government fund coincided with the appearance of about $600-odd million in his personal account. Not many have bought his explanation of the sum as a gift from a well-wisher. Mr. Mohamad says the scandal forced him to stage a political comeback and lead a punishing campaign. The veteran politician has sought to channel public anger against the recent imposition of a goods and services tax, portraying the levy as a penalty to recover the losses on account of the missing funds. The National Front is therefore anxious to avert a repeat of its performance in the 2013 polls, when it was returned merely by virtue of the parliamentary seats it won, while losing the popular vote. The party is acutely aware that it needs to regain some lost popularity if it is going to make the best of this election.

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