The goods and service tax is a major contributor in the upbringing of the economy. As it is supposed to bring some higher compliance and changes which are destined to prove healthy adaptation within the tax ecosystem. It is speculated that in the new tax system, tax evasion, ease of interstate business, simple tax compliance, a huge increase in tax base and reductions in prices have been expressed and due to its technology being operated, more transparency will come.
There are various inclusions by which the government is trying to cover the shortfalls of the current tax regime. From the proposed invoice matching concept, GST will prove to be a big change in the tax system and will also make an improvement in the way business is done. In present, the small and medium enterprises (SMEs) are the victims of the issues prevailing in the country enduring budding companies and their flaws.
So What will be Effect of GST Invoice Matching Concept?
Small businesses will be at risk of being excluded from the business but there is still room for improvement. As the input tax credit seems to be very significant in respect to the transactions done within the registered community.
The biggest shortfall is that the tax payment by the supplier is to link to the buyer with the available input credits and not on the basis of ‘real invoice matching’. The root cause of this provision is held from the past scenario of tax evasions through fake bills which were going out of hands from the government to cease the activity.
The government is in conception that unhealthy trade practices will be automatically expelled from the market. But still, there are various issues which need to be sorted out. However, the complexity of increasing compliance will be less, but due to this, the closure of the business which is a harmful consequence has not been taken seriously enough. The government’s say on this point is that these days some business entities are claiming input credit in a wrong manner.
And for the same reason, it is advisable to put the allegations and post-implementation results over the assessed. The problems are not only the side effects of cash flow, wrong accounting, management of direct risk but the actual reason lies in the uncertainty of business returns.
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The provision of invoice matching in the GST Act is aimed to prevent false claims by the means of non-existent invoices or the amount that does not match the original invoice. This will spell out the frauds and will bring maximum taxpayers under the purview of tax. However, in addition to the payment, the linkage has blurred the system.
Some people will refuse to pay the supplier by the 30th of the following month. This will create an unusual increase in the need for working capital while some individuals will refuse to pay taxes. By which, the situation of multi-level transactions will increase gradually making a business doing expensive. In such a situation, some people will be asked for a bank guarantee to avoid risk and here the issue emerges that most SMEs don’t have a solution to fulfill such a demand.
Small businesses have to deal with a lot of problems in the name of cash flow and even after a delay in getting a number of sales, his plans tends to collapse. Although the businessman will not intend to deceive in tax matters, the difficulty in maintaining up to compliance will become even harder. With this kind of difficulty, there will be a crisis which will ultimately change the supplier to reduce their risk. A provision proposed is that the government will be making ‘compliance evaluation’ to be in public domain making suppliers transparency in front of its dealers.
Ultimately, it is found that the difficulty of a small business will now be in public making an impact. Therefore, when someone misses the guidelines this month, it will be grown double in the next month this means the customer will be swept away and will buy the goods from other suppliers. The problem will multiply and consequently, payment will be delayed further. After which the evaluation will go down as a result, more customers will bounce from the supplier’s list eventually making the business close.
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One must notice that this is just an unintended consequence of a good intention. Earlier it was not possible for the government to reduce the risk of fake invoice presentation because there was no such human capacity, where offenders could be tracked down especially in cases of those who repeatedly creates shallow organizations and forged invoices.
In such a background, the government wants to control this issue and GST provides extraordinary ability to place the solution on the table. All counterfeit bills will be eliminated due to invoice matching concept. Still, is speculated that the issue of shallow companies will sustain but the ability to attach points due to joining the bank account and PAN card will be so much that it is almost impossible for people to get saved by fraud.
Regarding the amendment in the proposed law in relation to separating payment from input tax credit and associating it with invoice upload and matching, it is assumed that it will be beneficial for the economy and every taxpayer as a whole.