Simplified compliance requirements
From excise standpoint - The retail sector typically undertakes activities such as packing and repacking of goods procured in bulk quantities into retail packs. Such activities with reference to specified products are treated as deemed manufacture under the current excise laws and accordingly are liable to excise duty. As a result, under the current tax regime, the retail stores are burdened with the responsibility of complying with the rules and procedures prescribed under excise law. The retailers have to ensure timely payment of such taxes, filing of returns etc. leading to practical difficulties and increased compliance costs. Further, the additional excise duty burden is possibly borne by the retail sector as increases in the price of products may not always be possible. The GST regime can help address some of these problems.
From state VAT standpoint - Currently the retail traders need to deal with different compliance procedures in different states. Besides adding to compliance costs, these pose problems in maintenance of uniform and consistent documents and accounts across all states. This leads to serious IT systems challenges. The GST regime would reduce the currently prevalent disparities in compliance procedures across different states to a large extent thereby paving the way for a far lower tax compliance cost for the retail sector.
Uniform threshold limits under proposed GST regime - The current tax structure lacks uniformity, in terms of prescribed threshold limits and periodical compliance requirements. The threshold limits prescribed by the different State VAT laws vary from INR 0.2 million to INR 0.5 million. Under the proposed GST regime, a uniform SGST threshold across states is recommended at a gross annual turnover of INR 1 million both for goods and services. However, the threshold for CGST for goods is proposed to be kept at INR 15 million with a similar high level for services as well. In addition, there would be a compounding cut-off at INR five million of gross annual turnover and a floor rate of
% across the States.
Differing thresholds for CGST and SGST will be relatively difficult to administer as compared to administering uniform thresholds across the two taxes. Further, differing thresholds across goods and services will also pose problems. Clearly, uniform thresholds are a better option from a business standpoint. The retail trade has a stake in ensuring uniform thresholds. However, should the differential thresholds remain intact, the retail sector would need to adopt thereunder in order to ensure that it is both compliant under differing thresholds as well as able to fully offset its input taxes.