Category: GST

India’s Goods and Services Tax (GST) was touted as a revolutionary reform that would simplify the tax system and transform the economy. However, over five years since its implementation, GST still poses major challenges for businesses across the country.

Despite the government’s efforts, tax evasion and fraud remain rampant. Honest taxpayers struggle with complex compliance requirements, mismatched input tax credits, refund delays, and frequent changes in rules and interpretations.

The issues are so pervasive that India is losing billions of rupees in revenue each year to GST evasion. Solving these problems is crucial, not just for businesses’ bottom lines, but for the nation’s fiscal health.

Fortunately, there is a solution – working with a professional GST consultancy like Filingwala.com. By partnering with experienced experts, you can navigate the GST minefield, rectify past issues, and future-proof your compliance. Not only will this give you peace of mind, but it will also help stem the tide of tax evasion and strengthen India’s economy.

The Staggering Cost of GST Evasion in India

The numbers are shocking. According to government estimates, India lost a staggering ₹70,000 crores ($9.1 billion) in potential GST revenue in the 2020-21 fiscal year alone due to tax evasion. That’s almost 10% of the total GST collection!

Tax evasion comes in many forms – under-reporting of sales, issuance of fake invoices, wrongful ITC claims, non-payment of taxes collected, and more. While a small percentage of willful fraud accounts for the biggest losses, a much larger number of businesses make mistakes due to ignorance, lack of resources, or overly complex compliance requirements.

This rampant evasion has hit government revenues hard. Several states face soaring deficits, largely due to shortfalls in GST collections versus targets. At the national level, the tax gap is becoming an impediment to funding critical priorities like infrastructure, healthcare, and education.

There are also broader economic costs. Honest businesses that dutifully comply with GST face higher costs, reduced competitiveness, and cash flow crunches. This hampers growth and investment. Tax evasion creates an uneven playing field and rewards unscrupulous practices. If left unchecked, it can taint India’s reputation as an attractive investment destination.

The government is well aware of the problem and has taken steps to tighten enforcement, upgrade IT systems, and simplify GST. But clearly, more needs to be done. Bridging the massive tax gap requires a multi-pronged approach – smarter policies, better technology, stricter action against fraud, and crucially, handholding of businesses to improve voluntary compliance.

Common GST Issues Faced by Businesses

To solve the GST evasion crisis, it’s important to understand its root causes. Here are some of the biggest pain points that businesses of all sizes grapple with:

Reconciliation Errors & ITC Mismatches

Under GST, businesses can claim input tax credit (ITC) for taxes paid on purchases to offset against their output GST liabilities. However, claiming the correct ITC requires reconciliation of purchase invoices with suppliers’ sales figures in GST returns.

This can be an accounting nightmare due to factors like delayed filing of returns by suppliers, cancelation or revision of invoices, mismatch in HSN/SAC codes, different GSTIN branches, and more. Even a small mistake can lead to huge demand notices and interest liabilities from tax authorities.

E-Invoicing and Compliance Burdens

With a bewildering array of returns (GSTR-1, GSTR-3B, GSTR-9, GSTR-9C, etc.), e-way bills, e-invoicing, and frequent requirement changes, GST compliance has become a hugely time-consuming and expensive exercise. For smaller businesses, arranging the necessary infrastructure, software, and skilled manpower is an uphill task.

Refund Delays and Liquidity Crunches

Due process for GST refunds is often painfully slow. Businesses, especially exporters and those who have reversed excess ITC claims, can face extended delays in getting their funds reimbursed. This creates working capital issues, hampers operations, and hurts competitiveness.

Lack of Clarity and Frequent Changes

The GST law is still evolving, and tax authorities frequently issue new notifications, circulars, and rule changes. This deluge of information can be difficult for businesses to keep up with, leading to confusion, contradictory interpretations, and unintentional non-compliance.

Why You Need a GST Expert

Given the numerous complexities involved, managing GST in-house can be an uphill battle for most businesses. Even organizations with dedicated tax teams can struggle to stay on top of all the nuances.

That’s why an increasing number of companies are turning to professional GST consultants. By partnering with the right experts, you can enjoy several key benefits:

• Comprehensive guidance on all aspects of GST from registration to returns to audits
• Prevention of costly errors through proactive reconciliation and compliance checks
• Customized solutions tailored to your specific needs and challenges
• Peace of mind knowing your GST affairs are in order and liability risk is minimized
• Access to up-to-date information on regulatory changes and judicial precedents
• Relief from operational hassles so you can focus on your core business
• Potential for major cost savings through efficient ITC management and refund assistance

How Filingwala.com Can Be Your GST Problem Solver

Among the numerous consultants out there, Filingwala.com stands out as a GST solution provider you can truly rely on. Here’s why:

Full-Service GST Consultancy

With Filingwala.com, you get end-to-end support for all your GST needs – from registration, returns, payments and reconciliation, to periodic audits, assessments, appeals, and GST refunds. Our experts assist with any issue, big or small.

Automated GST Filing & Reconciliation

Filingwala.com harnesses the power of technology through its fully automated GST filing platform. It handles everything from data extraction and error checks to invoice matching and generating returns for filing. This minimizes human errors, saves time, and ensures 100% reconciliation.

Experienced Professionals & Customized Solutions

Every client engagement is handled by seasoned chartered accountants, tax practitioners, and legal experts with deep GST domain knowledge. We provide personalized guidance tailored to your specific industry, size, and challenges. This is not one-size-fits-all.

Why spend months trying to wrap your head around GST nuances or hire an inexperienced in-house team? By outsourcing it to the specialists at Filingwala.com, you can rest assured your GST compliance is in safe hands. This frees you up to concentrate on your core business.

Solve Your GST Problems Today

Don’t let GST hurdles hold your business back or make you vulnerable to tax demands and penalties. Take charge of the situation by partnering with Filingwala.com.

With our expertise at your side, issues like ITC mismatches, compliance errors, and refund delays will be a thing of the past. You’ll gain full visibility into your GST liabilities, plug revenue leakages, become audit-ready, and unlock trapped cash flow.

Solving GST evasion requires a multi-pronged approach. While the government strengthens enforcement and systems, businesses must play their part too. By improving compliance through expert assistance, you’ll not only secure your interests but contribute to India’s fight against tax fraud.

Contact Filingwala.com today for a free consultation on how we can support your business. Navigate the GST maze with confidence and peace of mind. Together, we can fix the GST bleed.

FAQs About GST & Filingwala.com

Q1. Why is GST compliance so complex in India?

GST in India has multiple tax slabs, a multitude of returns, complex rules for ITC eligibility, frequent changes in procedures and interpretation, and tech glitches – all of which combine to make compliance challenging. Lack of proper infrastructure and domain expertise also compounds the difficulties.

Q2. Will engaging a GST consultant be very expensive?

Not necessarily. An experienced GST partner can actually end up saving you much more in terms of avoided tax liabilities, penalties, interest, and operational costs. The efficiency gains and peace of mind also make it worthwhile. Look for transparent and flexible pricing models.

Q3. How can I ensure my business data remains confidential with a third party?

Filingwala.com follows stringent protocols around data privacy, confidentiality and security. We sign comprehensive NDAs with all clients and use enterprise-grade tools to protect your information.

Q4. What kind of sector experience does Filingwala.com have?

Our team has handled GST matters for a wide range of industries including manufacturing, services, e-commerce, exports, real estate, healthcare, and more. We customize our approach to fit your specific business needs.

Q5. Does Filingwala.com provide support beyond GST?

Yes, we offer a comprehensive suite of taxation and compliance services covering direct taxes, company law, foreign trade policy, intellectual property, payroll processing, and more. Think of us as your one-stop-shop for all legal and regulatory requirements.

Optimize your GST compliance, control costs, and avoid tax leakages. Contact Filingwala.com today!

The introduction of Goods and Services Tax (GST) on July 1, 2017 was hailed as a landmark moment in India’s taxation history. This new unified indirect tax system was meant to simplify taxation, remove cascading effects, promote tax compliance and boost economic growth.

However, more than 4 years since its rollout, GST continues to face several roadblocks that are impacting businesses, government revenues and the economy. Let’s examine the key ongoing issues and problems with GST implementation in India.

Technical Issues Plaguing GST

The GST Network (GSTN) – the IT backbone supporting GST – has faced glitches and outages ever since GST’s introduction. Some major technical issues include:

• Tight return filing deadlines – The due date for September GST returns is too short, not giving taxpayers enough time to claim input tax credit (ITC) before return filing. This leads to interest liabilities.
• Credit reversal requirements – Taxpayers have to reverse ITC if payment to vendors is not made within 180 days. This adds compliance burden for tracking payments.
• Lack of downloadable GSTR-2A – Since the annual GSTR-2A cannot be downloaded, it becomes difficult for taxpayers to match books of account and file accurate returns.
• No modification facility in GSTR-3B – There is no provision to amend GSTR-3B after filing. Even small errors require filing a revised return and paying interest.
• Ambiguity in TRAN-1 form – The tax department sends notices to all TRAN-1 filers, increasing hassles for genuine taxpayers.

The GST Council needs to address these procedural issues on priority to reduce difficulties faced by taxpayers across India.

Problems Faced by Small Businesses

Small businesses with turnover under ₹20 lakhs were expected to benefit the most from GST. However, small traders are facing several challenges:

• High compliance cost – Additional expenses for hardware, accounting software and accountants for GST compliance.
• No GST exemption benefits – Despite being exempt, small businesses face demands for GST bills from buyers.
• Pricing challenges – Difficulty in ascribing MRP for handmade products like artisan goods. Dealer confusion on applicable GST rate.
• Lack of awareness – GST requires basic IT literacy. But many small units are run by illiterate artisans unable to issue GST invoices.

The government needs to increase awareness and reduce compliance burden for small businesses to enable them to focus on growth.

E-commerce Companies’ Struggles

E-commerce giants also faced unexpected challenges after GST implementation:

• Capital lock up – TCS (Tax Collection at Source) provisions lead to working capital blockage, affecting day-to-day operations.
• Additional logistics costs – Interstate supply of goods was seamless pre-GST but now attracts SGST, increasing costs.
• Compliance burden – E-commerce operators must collect TCS from sellers on each transaction and file monthly TCS returns in addition to usual GST returns.

The GST Council should tweak provisions to lower compliance burden and operational costs for e-commerce companies.

E-way Bill and Interstate Trade

The e-way bill mechanism was introduced to track interstate movement of goods and prevent evasion. However, roll out issues created havoc:

• Technical glitches – Network failures on e-way bill launch date left transporters stranded and highways deserted.
• Procedural difficulties – Constant expiry and need to regenerate e-way bill for each shipment increases hassles for transport companies.
• Impact on supply chain – Disruptions due to e-way bill compliance leads to delays and wastage for time-sensitive sectors like cold storage.

The e-way bill system needs stabilization along with a simplification of procedures to prevent disruptions to interstate trade.

Tax Evasion Becoming Easier

Frequent changes in GST rates and procedures, along with glitches have facilitated increased tax evasion:

• GST rate cuts – Reduced rates on over 200 items and a generous composition scheme attracted non-compliant dealers.
• Return filing delays – Only 70% of GST taxpayers file returns regularly. Delayed filing enables evasion.
• GSTR-1 and GSTR-3B mismatch – ₹34,000 crore differences indicate large-scale under-reporting of revenue by businesses as per a 2019 CAG report.
• Fake invoicing – GST has seen a spurt in bogus billing networks misusing input tax credit. 225 fake GSTIN entities identified till March 2022.

The GST Council needs to plug loopholes and take strict action against fake invoicing, under-reporting and delayed filing to shore up collections.

Revenue Shortfall Impacting Budgets

GST revenue shortfall has been a constant issue, falling short of projections by ₹1-2 lakh crore each year:

• State compensation – Centre paid ₹90,000+ crore in FY19 to compensate states for GST losses, against projected ₹60,000 crore.
• Fiscal deficit – Revenue loss forces increased borrowing and taxation to fund budgets, increasing common man’s burden.
• Subsuming fuels difficult – States unwilling to bring petrol, diesel etc. under GST due to existing revenue uncertainty.

Revenue augmentation measures like improved compliance and expanded tax base are vital for GST stability.

Difficulty Adapting to the IT Ecosystem

The main challenges faced in moving to an IT-driven tax system are:

• Digital literacy – Majority of small businesses in India have limited technology exposure and struggle with digital solutions.
• Procedural knowledge – GST involves regular invoice data uploads, reconciliations, report creation and return filing. Lack of expertise in these activities leads to errors.
• Cost of compliance – Smaller firms cannot afford expensive ERP software or dedicated compliance teams, resulting in compliance gaps.

Simplified procedures and extensive taxpayer education drives can enable smooth transitioning to GST technology.

Widespread Confusion

The multiple rate slabs, frequently changed rates, complicated procedures and compliance needs have led to mass confusion and instability:

• Too many tax slabs – 0%, 0.25%, 3%, 5%, 12%, 18% and 28% GST rates, apart from exempt items, are difficult to keep track of.
• Frequent rate changes – 200+ items have seen rate cuts since GST inception. Frequent changes become difficult to adapt to.
• Partial coverage – Crude oil, natural gas, aviation fuel, alcohol are still outside GST, distorting input pricing.
• Compliance burden – Multiple monthly and quarterly returns to be filed with extensive data. Complex procedures for invoicing, reporting and reconciliations.

Stability in terms of rates and procedures is needed to enable businesses to streamline operations. Extensive awareness programs explaining GST aspects can also help reduce confusion.

Challenges for Chartered Accountants

Chartered Accountants play a crucial role in assisting businesses with GST compliance. But CAs also face key challenges:

• Full digitization – GST envisages online registration, return filing,payments. CAs used to offline processes struggle to adapt.
• Procedural Knowledge – Keeping updated on invoice formats, debit/credit notes rules, reverse charge, e-way bill etc. is difficult.
• Data reconciliation – Reconciling books of accounts, 2A data, purchases, sales & ITC for clients every return cycle becomes strenuous.
• Multiple returns – Helping clients with timely compliance across 3B, GSTR-1, CMP-08 etc. returns is challenging.

Robust IT infrastructure and extensive GST training programs for CAs can help overcome teething issues in assisting taxpayer compliance.

Recommendations to Fix GST Issues

Some measures that can help fix many of the problems seen with GST include:

• Improve GSTN robustness and simplify compliance procedures
• Mandate e-invoicing integration with GSTN to curb fake billing
• Increase taxpayer outreach programs to improve voluntary compliance
• Bring petrol/diesel under GST to streamline tax structure
• Tweak GST rates into 3 slabs to reduce complexity
• Increase tax official training to improve

FAQs

Q. What is the standard GST rate in India?

The standard GST rate in India is 28%. This is among the highest in the world. Only Chile has a higher standard rate of 29%.

Q. Are petrol and diesel included under GST?

No, petrol, diesel, natural gas, aviation turbine fuel and alcohol for human consumption are still outside the GST tax bracket. Bringing them under GST can significantly streamline taxation on these products.

Q. How many GST returns need to be filed in a year?

Based on business type, up to 37 GST returns may need to be filed in one year, including monthly, quarterly and annual returns.

Q. What is TCS under GST?

TCS or Tax Collected at Source refers to up to 1% tax collected by e-commerce operators or suppliers from their vendors/sellers and paid to the government on their behalf.

Q. What is meant by GST revenue shortfall?

The difference between the assured compensation amount to states by Centre at 14% yoy revenue growth, and the actual GST collections is known as the GST revenue shortfall.

Q. Who develops the GSTN network?

GSTN or GST Network is the IT infrastructure providing registration, return filing, tax payments and other technology services. GSTN is owned by Centre and states and was developed by Infosys.

Q. How is GST revenue shared between Centre and states?

CGST portion of GST revenue goes fully to Centre, SGST portion to states. Of IGST revenue, generally Centre gets 50% and states get 50% share.

Conclusion

Four years since starting its GST journey, India still has some distance to go in realizing the full potential of this tax reform. The technology infrastructure and compliance mechanisms need further stabilization. Procedures should be simplified and clarity improved to ease taxpayer difficulties.

Addressing the key ongoing challenges with focused action in critical areas can help realize the intended benefits of increased tax compliance, economic growth, transparent taxation and “one nation, one tax”. The GST Council must continue to proactively engage with stakeholders to quickly resolve issues and bottlenecks.

As India’s most comprehensive indirect tax reform, GST has set the stage for a globally competitive tax regime. But the positive impact can only be achieved through collaborative efforts between government, industry, chartered accountants and taxpayers to smooth out implementation wrinkles. With time and constant fine-tuning, India’s GST will start yielding the desired dividends.

Claiming Goods and Services Tax (GST) refunds can be confusing, but it’s an essential process for many businesses in India to maintain healthy cash flows. According to data, over ₹1.5 lakh crore in GST refunds remain unpaid. If you deal with exports, inverted duty structures, or have any unutilized input tax credit (ITC), you may be owed a GST refund.

This comprehensive guide will teach you everything you need to efficiently claim your entitled GST refund. You’ll learn who qualifies for refunds, the different types of refunds, documents required, mistakes to avoid, and more. Arm yourself with the knowledge needed to claim what’s rightfully yours.

Who is Eligible for a GST Refund?

You are eligible for a GST refund if you:

• Export goods or services outside India
• Purchase goods or services taxed at a higher rate than goods or services you provide (inverted duty structure)
• Have unutilised input tax credit at the end of a tax period
• Are an embassy or UN body entitled to refunds under special provisions
• For exports and inverted duty structures, you can claim a refund on excess GST paid. Those carrying forward an unutilised ITC balance can also recover the credit in cash.

Types of GST Refunds

There are three main types of GST refunds:

Refunds for Exports

Exporters can recover GST levied on raw materials and other inputs for exported goods and services. To promote Indian exports globally, exporters receive up to 90% of taxes back as refunds.

Refund Due to Inverted Duty Structure

GST paid on inputs can be higher than the GST applicable on a good or service. This inversion allows businesses to claim refunds of excess GST paid. Common in textile manufacturing where inputs are taxed at 18% but output at 12%.

Refund of Unutilised ITC

If your input tax credit for a tax period remains unutilized, you can claim an ITC refund up to the minimum refund amount or 10% of total ITC, whichever is higher. This refund clears out your ITC balance sheet.

Now let’s dive into the separate procedures for an unutilized ITC vs. export refund.

Claiming an Unutilized ITC Refund

When input tax paid exceeds your GST tax liability for that period, you generate an unutilised ITC balance eligible for refunds. Follow this process:

Step 1: File Your Monthly GSTR-3B

You must file monthly GST returns before applying for a refund. This fixing your ITC claims, taxes paid, and liabilities for that tax period.

Step 2: File a GST RFD-01 Application

Access the GST portal and select Services > Refund > Application for Refund to start your refund application with form GST RFD 01.

Step 3: Fill in Your Refund Details

Enter your taxpayer details, ITC balance, bank details, reason for refund, and verification information correctly to ensure smooth processing.

Step 4: Submit Supporting Documents

Attach all supporting documents listed in the next section, including statement of invoices and customs clearances.

Step 5: Receive Provisional Refund Order

A tax officer will verify your GST RFD-01 application and issue an RFD-04 provisional refund order if approved. 90% of the sanctioned refund amount releases.

Step 6: Submit Proof of Refund Received

After receiving the provisional refund, file an RFD-05 to submit proof of refund received. This helps finalize the remaining 10%.

Step 7: Get Remaining Refund Amount

After satisfactory proof, the tax officer closes the refund case and issues the remaining 10% refund amount. Account is settled.

Claiming an Export Refund

Exporters enjoy various GST refund benefits to boost India’s exports globally. Follow this process:

Step 1: Ensure Export Eligibility

Only exports qualify for refunds. Maintain valid documents like customs/foreign inward remittance proof, bank realisation certificates etc.

Step 2: File Shipping Bill Details

Provide shipping bill details and integrated GST paid in GSTR-1 for relevant tax period. This links GST paid on inputs with exports.

Step 3: File Bond/LUT

Submit a Letter of Undertaking (LUT) or bond to export without paying integrated GST. This LUT commits to pay IGST if export proof isn’t provided later.

Step 4: File GST RFD-01

Claim refund by filing details of exports, ITC claimed, bank account details etc. in form GST RFD-01 under the export with payment of tax option.

Step 5: Submit Supporting Documents

Attach documents like exports invoices, bank realisation slips, foreign inward remittance proofs, transport proofs etc. to establish genuinity.

Step 6: Receive Provisional Refund

Tax officer scrutinizes the application and issues RFD-04 for 90% of eligible refund on a provisional basis.

Step 7: Submit Proof of Refund Received

File an RFD-05 to submit proof of receiving the provisional refund. Helps tax authorities reconcile accounts.

Step 8: Get Remaining 10% Refund

On satisfactory reconciliation, the officer disposes case and refund balance 10% to close account.

Important Steps to Receive Your Refund

Follow these steps for smooth GST refund processing:

• File accurate, consistent GST returns ensuring ITC claims match liabilities.
• Ensure bank account active to avoid refund rejection.
• Match invoices uploaded with actual tax paid to avoid queries.
• For exports, submit export proof quickly to expedite refund.
• If refund application rejected, timely resolve issues and reapply correctly.
• Track refund application status online and check for processing issues.
• For large refunds, break into smaller amounts in multiple applications.

Documents Required for Refund Claim

Include these documents to verify your GST refund claim and avoid deficiencies:

• GST Registration Certificate
• Tax Invoices
• Tax Payments Receipts
• Export/ITC Details
• GST Return Copies (GSTR-1/GSTR3B)
• Bank Statement
• Export Documents (Shipping Bill, Foreign Inward Remittance Proof etc.)

Timeline for Receiving Approved Refunds

Expect the following refund processing timeline:

ITC Refunds: 60 days from application to disburse full refund
Export Refunds Without Payment of Tax: 60 days from receipt of full documentation
Export Refunds With Payment of Tax: 90 days from receipt of full documentation
The tax officer can also initiate further investigation/verification which can delay refunds.

Common Mistakes to Avoid

Steer clear of these errors that can lead to refund rejection:

• Incorrect Bank Account Details
• Mismatch in Tax Details of Purchases/Sales
• Failure to Respond to Deficiency Memos
• No Supporting Export Documents
• GST Return Filing Default
• Past Demand or Recovery Issue

Take time to enter accurate details, cross-verify ITC claims, and proactively respond to queries through the proper channel. This prevents refund rejection or delays.

FAQs on GST Refund

Confused about certain aspects of GST refunds? Here are answers to some frequently asked questions:

Q: Can I claim refund and ITC carry forward together?
A: No, you must choose one option in your GST refund application.

Q: Is interest paid if refund gets delayed?
A: Yes, interest is paid if refund not granted within 60 days of receipt of documentation.

Q: Is export refund amount subject to income tax?
A: No, GST refund of taxes paid related to exports is tax exempt income.

Q: Can I claim refund on exclusively zero-rated supplies?
A: Yes, those dealing only in exports/SEZ supplies still claim refund of taxes paid on inputs.

Q: What if refund claim gets rejected?

A: Analyze the reasons, rectify issues and reapply for refund with correct documents within 2 years.

Conclusion & Next Steps

Claiming GST refunds allow businesses to boost working capital liquidity significantly while staying tax compliant. With this definitive guide, you should clearly understand the GST refund eligibility criteria, process to file, documents required and common pitfalls.

The next step is to determine your export/ITC status, assemble all documents outlined above, take professional assistance if needed, and apply for refund through form GST RFD 01. Be sure to capture all details accurately in both returns and refund application and respond promptly to any discrepancies.

With some time and diligence to follow the proper procedures, you can ensure successful GST refund disbursal without delays or rejection. The boost to cash flows make the effort well worth it.

If you need any assistance with registering for GST, filing returns, understanding compliance requirements or claiming refunds, the dedicated experts at filingwala.com can help. Filingwala.com is an accounting services company that specializes in providing small businesses and startups with accurate and affordable services for taxes, registrations, bookkeeping, payroll and more.

Their tax professionals have filed thousands of successful GST registrations and refund claims worth crores of rupees in savings for clients across India. By customizing their services for your unique business needs at a fraction of high CPA fees, filingwala’s experts guarantee 100% accuracy of your compliance at affordable rates.

To determine your eligibility and get started with claiming GST refunds stress-free, book a consultation with filingwala.com today. Their reliable accounting services ensure your business remains compliant, cashes in on every tax benefit and bonus refund owed, and avoids any penalties or interest.