GST Return Filing: Errant Vendors Are A Headache, Say Small Businesses

Vendors wait for customers at wholesale stalls selling fruit inside Crawford Market in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Written by
Payaswini Upadhyay
Written by

Payaswini Upadhyay

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Form 1, 2, 2A, 3B, 10 and lots of them in between—the goods and services tax regime brought with itself a new framework for filing returns, one that replaced many physical forms with an online one-stop filing window—the Goods and Services Tax Network.

But that required small and medium businesses to move from manual book-keeping and physical invoices to digital ones.

Businesses BloombergQuint spoke with said while they have managed to tide through the initial learning phase, there are several requirements that are proving to be painful, especially those that put the compliance burden of errant businesses on honest ones.

The Fear Of Making Errors

Just days before the due date for filing detailed GST returns last year, the government realised that both the taxpayers and GSTN are not ready. And so, Form GSTR 3B was introduced. This form captures the summary of outward and inward supplies. Soon after, GSTR-1 was made mandatory—this required taxpayers to file detailed, invoice level data of outward supplies. But the matching of invoices uploaded by buyers and sellers hasn't started as yet.

Before that is notified, the existing processes need to be made even more simpler, said Chandrakant Salunkhe, president of the SME Development Chamber of India.

SMEs shouldn't have to approach professionals all the time. For annual return, claiming credit, etc, it's still okay. But for regular compliances, the process needs to be simplified. Entrepreneurs fear that they'll make mistakes and their tax will go to any other account. And if any error happens, how will they claim? Who should they contact and how?

Chandrakant Salunkhe, President, SME Development Chamber of India.

So, the platform needs to be simplified further, especially because small entrepreneurs are not educated on the taxation front, Salunkhe said.

Issue Of Errant Vendors

Education and simplification of the process is one part. Getting vendors to become GST-compliant is another difficult task, GM Warke, chief executive officer at Hi Media Laboratories, said.

Warke's company manufactures culture medium for microbiology that is used in the pharmaceuticals, food and agriculture industry.

There are certain vendors, from whom we purchase material, who are not paying the tax at all, Warke said.

When we buy from them, we pay the tax. But they don't deposit it with the government and that impacts our input credit. We have to keep sending reminders. One of our vendors has not paid the tax worth Rs 20 lakh since June 2017. We told him we'll stop his payment but most of them are thick-skinned. He said he won't do our work.

GM Warke, CEO, HiMedia Laboratories

“Such vendors quote less, become the lowest bidder in a tender process and we give the business to them. At that time we look at their credibility and competence but we don't know if they are tax defaulters; so in such cases we have to forego credit,” Warke said.

It is this cost of compliance that small and medium enterprises want the government to address.

Revenue Secretary Hasmukh Adhia has indicated that simplification of the return filing process is going to be one of the key agendas of the GST Council in the second year. The key will be to simplify the forms and process while ensuring minimal revenue leakage, that might be a tightrope walk.