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Small and medium-sized taxpayers confront challenges under the GST framework.
1.REGISTRATION-RELATED ISSUE
We appreciate that the GSTN system has greatly enhanced the registration process over previous rules. KYC rules are reliable in determining a person’s legitimacy because of Aadhaar and PAN cards. Other documents may be taken into account in the same way. Minor inconsistencies have been known to cause registration applications to be refused. The following are some examples:
(a) Name or address discrepancy: In India, names and addresses are written in a variety of ways. There is no consistency. As a result, a person’s name in one document may differ from his or her name in other documents. Similarly, an address found in one document may not be identical in another. The Registering Officers regard it as a discrepancy in the application and automatically reject it. The registration should not be denied if the applicant is otherwise authentic.
(b) Proof of Business Location: India is known for its huge, undivided families, where family members and relatives live together under one roof. However, such a person may not be a member of the stated family in the traditional sense of the word. The property is in one person’s name, but the electrical bill is in another’s name. The requirements require a letter of authorization from the property owner or holder. However, many authorities demand that the rent agreement be registered; otherwise, registration will be denied. Furthermore, a rent agreement can be registered within four months of its completion. As a result, a registered rent agreement may not be required.
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(c) Due to a size restriction in the portal, the officer is unable to see the documents, resulting in the application being rejected: In typically, a Rent Agreement / Lease Agreement, or Ownership Document has a large number of pages (upto 50-100). However, while submitting said document at the time of registration on the GST Portal, the file size is limited to 2MB. It indicates that you can only upload files up to 2MB in size. Due to the file size restriction, a lower-quality file is uploaded to the GST portal, which is not fully viewable to the officer, prompting him to reject the application. The preservation of registration records is critical for the government. As a result, it is proposed that the size limit be increased to This will eliminate a large number of registration rejections that aren’t required.
(d) Documents requested by Officers in order to provide registration: That the GST Rule explicitly stipulates the list of documents to be filed for registration purposes. Further interpretation by the involved Officers is plainly outside their scope, and as a result, the tax payer is harassed, and the government’s income collection is compromised as a result of the delay in acquiring the registration.
2. ISSUES RELATED TO REGISTRATION CANCELLATION
For noncompliance, the GST authorities have the authority to cancel registration on their own. The primary reason for the cancellation of a substantial number of registrations is failure to file returns. The main reason for not being able to pay tax is that many small and medium-sized tax payers rely on recovery and have no alternative means of obtaining funds. Cancellation of registration not only puts them in more problems, but it also has a cascade effect on his consumers.
(a) Separate return filing and tax payment: ITC is not given until the government receives it. There is no revenue loss if returns are permitted without payment of tax. Return filing and tax payment should be viewed as two separate operations that are not related. The system may also allow for partial tax payment and payment in instalments. At the very least, the information about outward supply will be available for further action if returns are permitted without payment.
(b) No retroactive cancellation: Retrospective revocation of a tax payer’s registration certificate is unfair to the innocent and honest taxpayer. Because his consumers must be unaware of the cancellation. When the ITC is refused to him, the fact of cancellation becomes known to the consumer. He must suffer the consequences of the revocation of another tax payer’s registration. If the cancellation has a retroactive effect, the problem is exacerbated. In this instance, the innocent taxpayers are the ones who suffer the most.
(c) Financial stress during the covid period: Many small and medium tax payers are experiencing major financial difficulties throughout the covid period. The government is attempting to assist by providing financial aid. In such a case, cancellation of registration is counterproductive to the government’s current needs, which include the handholding of small and medium tax documents. He cannot afford to postpone or cease his operation, even if the registration certificate is revoked. Tax compliance is less vital than survival. This is a problem that primarily affects tax payers in the unorganised sector. They are only semi-literate and have no additional skills or sources of income. As a result, the cancellation of their registration certificate effectively forces them into the grey market.
3. PROBLEMS WITH INPUT TAX CREDIT:
Section 16 of the CGST/SGST Acts establishes time constraints for claiming and/or declaring external supplies required to claim ITC. They have proven to be a serious thorn in the side of company, resulting in significant additional costs and a cascade effect. It has engendered a great deal of hostility among honest tax payers.
(a) The six-month time limit may be lifted: Following a recent modification to Sec 16(2), a taxpayer cannot claim ITC unless it is represented in Form 2B. Cross-verification is particularly successful with the GSTN system, and it can rule out claim duplication. As a result, the six-month time limit may be eliminated entirely. It serves no use other than to deny ITC claims that are otherwise genuine.
(b) A 180-day time limit serves no useful purpose: the payment terms are set by the buyers. Payment periods sometimes surpass the 180-day maximum. In this instance, it is expected that the ITC will be reversed and applied to the outgoing tax. ITC must be reclaimed once payment has been made. The possibility of a post-sale discount or a mutually agreed-upon lower payment adds to the ambiguity; whether the provision applies in such a circumstance or not has to be determined in clear terms. This activity does not enhance tax income, but it does increase compliance costs and capital blockage. When there are a high number of transactions, keeping track of them is a difficult task.
When there are a high number of transactions, keeping track of them is a difficult task. Reversal and recapture of ITC is an useless process when the government has already collected the tax. It is wishful thinking to believe that individuals who delay payment of the principle amount will pay it to the supplier because they may have to reverse ITC at any point.
(c) The appropriate proviso in 16(2) should be deleted: We believe that the GST principle is very business friendly, but that many rules are unjust and unfair to honest tax payers, increasing their burden. If the above proposals are embraced, we are confident that the GST will be fair and just for honest tax payers.
(d) IGST Credit not reflected in Form-2B: The GSTN site does not capture or reflect auto-populated bill-of-entry data. As a result, taxpayers are having trouble obtaining an input tax credit. This requires an immediate solution, such as integrating IGST payments on imports to the GSTN portal.
4. PROBLEM WITH FILING A REVISED RETURN TO CORRECT ARITHMETICAL ERRORS
 Because GST was new, there were a number of unintended arithmetical errors made by taxpayers when filing GST Returns and complying with numerous rules such as E-way Bills, reporting B2B as B2C, reporting invoices to the incorrect GSTIN owing to a typographical error, and so on. As a result, we respectfully request that you allow us a one-time opportunity to correct any legitimate or inadvertent errors. It will assist all taxpayers in complying with the GST law as well as facilitating the free flow of ITC.
5. PROBLEM WITH FILING A REVISION PETITION BEFORE THE COMMISSIONER IN THE EVENT THAT THE FIRST APPEAL IS DISMISSED IN LIMINE:
It is true that the government has been unable to establish GST Appellate Tribunals around the country. If the Taxpayer’s First Appeal is denied for any reason, including default, he will have to appeal to the State’s Hon’ble High Court. Many small taxpayers are unable to afford the lawyer’s fees and expenditures. As a result, if the First Appeal is dismissed on limine, a provision may be provided in the interest of justice to file a Revision Petition before the Commissioner of the concerned State.
6. ISSUE RELATED TO THE FORMATION OF A ADVISORY COMMITTEE AT THE CIRCLE, RANGE, OR DIVISION LEVEL
A popular government is continually looking for flaws in the working system. As a result, advisory committee meetings at the Circle/Division/Range level were held at least twice a year in the past to learn about technical as well as other challenges experienced by Taxpayers. Information gathered from tax payers was compiled and posted on the Department’s website, and difficulties relating to various parts were eventually resolved. As a result, it is advised that the government restart the process of identifying and resolving the challenges that Taxpayers face at the grassroots level.