As GST turns 5, 45% businesses give it a thumbs up while 24% express dissatisfaction

June 30, 2022, New Delhi: The Goods and Services Tax (GST) will complete 5 years of implementation on July 1st, 2022. The comprehensive, multistage, destination-based GST was implemented after 101st amendment of the Constitution of India by the NDA Government. It replaced multiple taxes, which were levied by the Central and State Governments, so that there would be “transparency” and “ease in tax compliance” than the pre-GST indirect tax structure that had a broad scope for tax evasion. The single-tax GST is applied all over India with a set-off provision for tax paid on inputs, keeping in mind both the burden of the businesses and inflation rates. It currently has four slabs of 5%, 12%, 18% and 28%.

As GST completes its 5-year mark on July 1st, 2022, LocalCircles has gone back to Indian businesses to collect their responses to understand how GST is working. Since its implementation, it hasn’t been easy for smaller businesses to adapt to the new GST taxation. Businesses on the LocalCircles platform have been suggesting that they have been facing several issues to comply with provisions under GST. Even traders’ body has urged the government to waive mandatory GST registration for eCommerce sellers, to name a few.

Taking cognisance of suggestions and inputs from businesses, LocalCircles has conducted a survey to highlight problems they’ve been facing in regards to GST compliance, and to check their pulse if the GST taxation regime has been able to bring in transparency and ease in tax compliance as compared to pre-GST era. This allows both the broader business community and the Government to understand where things stand and what needs to be worked upon that is of pivotal importance in the fundamental success of the Goods and Services Tax. The survey received over 12,000 responses from over 2400 businesses located across 170 districts of India. 47% respondents were from tier 1, 32% from tier 2 and 21% respondents were from tier 3, 4 and rural districts. The survey was conducted via LocalCircles platform and all participants were validated business owners who had to be registered with LocalCircles to participate in this survey.

37% businesses are spending more time on GST compliance versus pre-GST business taxation

Before the implementation of GST, the filing of indirect tax returns by the taxpayers was independent of the supplier or buyer’s return, which was mostly done once a month or quarter. Under GST, businesses must upload invoices as well as make sure input credit claim is reconciled or else pay penalty. The first question asked businesses, “How much more time are you spending on GST compliance versus pre-GST business taxation?” In response 26% said “Same as before”, another 26% said “Marginally more” and 11% are spending “Significantly more” time on GST compliance. Breaking down the poll, 37% of businesses said they are spending “Significantly less” time. On an aggregate basis, 37% of businesses are spending more time on GST compliance versus pre-GST business taxation. This question in the survey received 2,692 responses.

50% businesses say monthly accounting costs for them have increased post-GST

Under the GST regime, a business whose turnover during a financial year exceeds the prescribed limit of INR 2 crore must get its accounts audited. A business under GST has to maintain accounts like purchase, sales, stock, etc., aimed to bring clarity in many areas of business including accounting and book-keeping. The next question asked businesses, “How much have your monthly accounting costs increased post-GST as compared to the pre-GST?” In response, 28% of businesses said it has “Increased by up to 25%”, 14% said it “Increased by 25-50%”, and 8% said it “Increased by over 50% or more”. There were also 28% of businesses who said that it is remained “Still the same as pre-GST”. However, 14% of businesses said it “Has reduced by up to 25%”. 8% couldn’t say. On an aggregate basis, 50% of businesses say their monthly accounting costs have increased post-GST. This question in the survey received 2,688 responses. By and large, almost all accountants who work with businesses on GST filing increased their monthly or annual fee in 2017-2018 to the tune of 50-100%. Though GST has simplified over the years, the fee hasn’t reduced.

Connection issues, logging on and submitting information amongst top issues business have with GSTN website

Over the years of implementation of GST, reports are rife about taxpayers oftentimes facing technical failures while accessing the GSTN portal to file returns as well as understanding the filing process, etc. This resulted in difficulties or delays for many businesses to file their returns. Several times, the Centre had to extend the due date for furnishing annual GST returns due to such technical glitches. The following question asked businesses, “What is currently the top difficulty faced by your business/company in filing GST returns?” In response, 40% said they faced “Connection issues with GSTN website”, and another 40% said “Logging and submitting information on GSTN website”. Breaking down the poll, 20% of businesses were “Unable to understand GSTN website”. The findings suggest that connection issues, logging on and submitting information are amongst the top issues businesses have with the GSTN website. This question in the survey received 2,697 responses.

75% businesses say invoice matching between outputs and inputs is their top issue with GST

Technological glitches aren’t the only problem taxpayers have faced. The following question asked businesses, “What is currently your top issue with GST?” In response, the majority of 75% of businesses said their top issue with GST is “Matching invoice between outputs and inputs”. 25% said “Delay in refunds”. This question in the survey received 2,472 responses. Invoice matching is an area where when a business is tallying their output invoices and applying the due input tax credits. However, many businesses have raised the issue of dependency on suppliers here who if delay their GST compliance, it impacts the compliance of the entire supply chain. Many small businesses over the last four years have also raised the structural issue of having to pay GST for their customer invoices while the customers, in many cases large companies or Government bodies take 3-6 months at times to pay invoices thereby creating a cash crunch for the small business.

45% businesses are happy with 5 years of GST while 24% express dissatisfaction

The final question asked businesses, “As a business, how would you rate 5 years of GST?” In response, 25% said “Excellent”, 20% said “Good”, and 19% said “Average”. Breaking down the poll, 12% of businesses rated it as “Below average” and another 12% said “Poor”. Another 12% of businesses did not have an opinion. Overall, 45% of businesses are happy with 5 years of GST while 24% have expressed dissatisfaction. This question in the survey received 2,608 responses.

In summary, 37% of businesses are spending more time on GST compliance versus pre-GST business taxation period. 50% of businesses say their monthly accounting costs for them have increased post-GST. Also, Connection issues, logging on and submitting information are amongst top issues business have with GSTN website. Furthermore, 75% of businesses say invoice matching between outputs and inputs is their top issue with GST. Overall, 45% of businesses are happy with 5 years of GST while 24% expressed dissatisfaction.

LocalCircles will share the results of this study with the Ministry of Finance and the GST Council so that feedback of the businesses received can be given the due consideration and improvements can be made.

Survey Demographics

Over 12,000 responses from over 2400 businesses located across 170 districts of India. 47% respondents were from tier 1, 32% from tier 2 and 21% respondents were from tier 3, 4 and rural districts. The survey was conducted via LocalCircles platform and all participants were validated business owners who had to be registered with LocalCircles to participate in this survey. The survey was conducted via LocalCircles platform and all participants had to be registered with LocalCircles to participate in this survey.