Confusion Over GST 2.0 Fineprint Leads To Worries For Indian Businesses 

But then why are traders and retailers worried?

“It will be a state of chaos, concerns have risen for most of our clients. As things are getting unravelled, it seems it will take a while to resolve the chaos,” Nitesh Jain, a Chartered Accountant and Managing Partner, N J Jain and Associates told The Secretariat.

From the time the GST Council announced the changes in the tax structure, to be implemented in a limited timeframe, confusion has hit traders and companies.

In several cases the benefit of Input Tax Credit (ITC) – the component of the GST that is reduced during the time of paying tax on final output if it has been paid on inputs—has been withdrawn.

With sudden reduction in the tax rates, businesses are worried that it will take several years to get the ITC against the tax paid, even as the Council said that pending ITC will be cleared at the earliest.

Sources said that retailers have already purchased goods at 28 per cent GST, many of which are entitled for ITC. However, the reduction in GST rates from September 22, would mean that they would have to sell their goods at significantly lower prices. Traders, especially those who are mid segment, work on wafer thin margins of a mere 3-5 per cent. At this rate, it would take several years to offset the cost.

With thin margins and now the withdrawal of ITC may lead to cash crunch for the country’s small and medium businesses.

The issue of refunds can be resolved as per the sub-section (3) of Section 54 of the Central GST Act, which has a provision for refund. However, point number 10 of the FAQs released recently categorically stated, “The input and output being the same in such cases, though attracting different rates at different points of time, do not get covered under the provision of clause

(ii) of the first provision of Sub-Section (3) of Section 54 of the CGST Act.”

“If the government does not clarify soon, the courts would be flooded with litigations,” Jain said, adding that this could create more confusion amid several litigations already pending in various courts.

In a letter to finance minister Nirmala Sitharaman, the Federation of All India Distributors’ Association (FAIDA), representing close to five lakh distributors in FMCG, mobile, telecom, food and beverages, said that this poses a major challenge for all traders across the country. “The tax, already paid, will now remain stuck in ITC logjam. That amount is part of our working capital,” CH Krishna, President, Federation of All India Distributors’ Association (FAIDA). “In several cases large sums of money could get blocked, and this will dent operations,” he said.