New India Manifesto – Chapter 21: Tax Support System (TSS)
The current GST system excludes many small businesses and services and is discriminatory. Individuals who run certain small businesses take GST registration for online selling to register in different e-commerce platforms. At the same time, many businesses escape the GST network because the transactions are made in cash. There is no way to know how much money each business earns as long as the business is mainly done by cash.
Consider a small tea stall where 500+ samosas and 500+ teas are sold daily. With 10 rupees for each samosa and tea, the tea stall makes 10,000+ rupees daily. The business varies daily, and the numbers cannot be assumed correctly. However, we can assume that the yearly turnover is nearly 37 lakh for calculation. The system does not account for this amount, as all transactions are via cash mode.
Many shops registered in GST maintain two different account books one is for GST billing, and the second is specifically created to evade taxes. So even businesses already have GST is evading taxes. Manufacturers of certain items supply partial items outside GST to loyal shop owners, who receive non-GST items to be added to the second illegal book.
Vegetable shops, fruit shops, furniture businesses, hotels, handicrafts businesses and many other businesses are not taxed as the transactions are by cash. Turnover-based concept of GST registration is highly unsuccessful in India as direct cash billing allows GST evasions. Due to cash transactions, many home-to-home services, repair services, shop services, event management services, clinics and medical services are outside the GST system.
Packed food items locally made are one of India’s greatest markets, and it is not added under GST as most of them escape the tax net claiming low turnover. However, the system is inefficient in identifying what is happening in most businesses.
Some businesses with a turnover of less than 10 lakh are forced to take GST as the large industries that manufacture materials compulsorily demand GST registration of smaller business owners. Only if small business owners take GST will large industries supply materials directly. If smaller shops avoid taking GST and buy from large shops with GST instead of purchasing from the company, the profit margin will be significantly less for small shop owners.
Two account books are also maintained in many shops, where some items require compulsory GST billing as requested by companies who supply items, and the remaining items of the shop are sold without GST billing. The items distributors to the shops may be paying GST, whereas shops, due to small size, avoid these items from GST filing.
Distributors are also engaging in GST evasion all over India. Many small brands in India distribute frozen items, packed items and food items via distributors. Such brands and distributors do not apply for GST registration despite high turnover.
There are many contrasts in the existing GST system; a modified GST system is required to benefit the government, producers, service providers and sellers equally.
Tax Support System
The tax support system provides a support mechanism that aims to expand the existing GST system to all businesses and services, irrespective of size and turnover. It will provide a level playing field for small businesses, and government can increase GST registrations of small businesses. In addition, many benefits are provided to businesses via IT technology, training, materials and gadgets to transform their businesses.
Land and Building Accounting System
The Land and Building Accounting System will ensure that all nooks and corners of the nation are accounted for, and the buildings and land details are available to the government. This will ensure every single business in India will come under GST.
EAC Integration System
EAC Centre will process all items directly from farms, and all agricultural products will enter the taxation system. Therefore, placing the lowest percentage as GST rate for agricultural products is important.
The government will allocate GST numbers to the system handlers, such as EAC centres, for certain products and services where an exchange involves a non-GST supplier, such as a farmer. When a farmer sells his product via the EAC centre, then the EAC is the GST holder, and the proceeds from the sale excluded GST is transferred to the farmer, and the GST is transferred to GST authorities. There are no direct financial benefits for GST holders other than being the intermediary in the process. If a farmer directly sells to a shop, then the shop owner can use the nearest EAC centre’s GST number, pay the taxes, and generate a GST bill. This applies only to specific items currently not included in GST. People should compulsorily register for GST in case of items already included in GST.
Once national-level digitalisation progresses, everyone can be allotted a GST based on an Aadhar card and PAN card in the future. However, the resources to maintain something like that can be created only a few years after the implementation of Tax Support System.
Software And Hardware Integration
The government will create billing and barcode machines and distribute and maintain them for free to all small businessmen all over India. A billing software such as tally will be created and will have online and offline access facilities. Tax Support System employees will visit the workplace or business place once a week, connect their devices to the billing machine, and transfer the billing data in case of small businesses who have difficulty understanding the billing system and taxation. Any discrepancies in the billing will be sorted and will be analysed during direct visits. The billing software will be designed in a language they understand or a pictorial way business people can easily comprehend with a proper manual. Once people learn how to do things by themselves, they do not need direct visit support.
Inventory and Stock Management Free Labour Supply
TSS will provide free labour for adding new businesses under GST. The shop’s inventory will be added with the free assistance of the TSS. In addition, they will be trained on how to operate the billing machines.
Free GST Filing
All businesses below a particular turnover need not worry about GST filing as it will be the responsibility of the government to file GST on behalf of the business people. So there is no payment required for CA individuals or private agencies by the concerned business people as the government is paying for those services.
Additional 1 Lakh Crore Rupees Per Month as GST Revenue
Imagine If a small tea stall can generate 5,000 per month as GST revenue, then in a year government will receive 60,000 rupees as GST. So the amount invested in supplying the workforce for digitalisation, billing machines and maintaining TSS by the government for the tea stall is worth it.
Free Packing Materials and Carry bags
All small businesses can be formalised only if the government can bring them on board with the taxation system. Both government and businesses should benefit from the new system. Packing materials is one area in which government can directly engage. Providing purchased items in a one-time plastic carry bag is a nightmare for small businesses as all states have a ban. Also, certain products, such as food items, need containers or sealed covers. So TSS will provide carry bags for purchased items and packaging materials for non-packed items. This changes the aesthetic appeal of tea stalls, fruit stalls, vegetable shops, small food stalls and all other small businesses.
Non-E-commerce Service Tax
Services such as clinics, salons, laundries, gyms, and services without e-commerce provided at physical stores need different GST rates and taxation methods. For example, some should be taxed under service tax at an 18 per cent GST rate, and 13 per cent can be refunded instantly during filing to the businessmen. They effectively pay only 5 per cent as GST. Demanding more than 5 per cent from small businesses as a service tax will not benefit successful implementation. It is a reminder that in future, 5 per cent may increase. In other services, such as clinics directly, a minimal per cent can be charged instead of a refund method.
GST should be allocated to people providing wiring, plumbing, water tank installation, ac mechanic and home services. Five per cent should be charged as GST for their services. Free filing support and a mobile printer for billing will be provided.
When GST is expanded to areas where the state receives revenue exclusively, the states will be given the total collected GST amount instead of sharing it with the centre.
To bring areas such as liquor distribution under the GST ambit, the new GST system will be called ‘one nation one taxation system one collection system’ instead of ‘one nation one tax rate’. This is because each state can individually alter the GST per cent for their state for items previously exclusively collected by the state. However, items already part of the GST system and new areas do not have this advantage. For example, GST collection from a salon was not previously under the state revenue system or GST. So when they are added to GST, the state cannot adjust the GST rates of such services specifically for a state.
Is it an Injustice to Small Businesses?
India is not a developed country. Many of the small businesses and small farmers are the backbone of India. For nation-building, it is the responsibility of every citizen to contribute to the taxation system. If such a formal taxation system is in place for even small businesses, the government can tax the wealthy and corporations more than before.
Employment for 20 Lakh Individuals
TSS provides immediate employment to 20 lakh individuals all over India. Ten lakh individuals, especially commerce graduates from B.com and BBA backgrounds, can find jobs via TSS. In addition, part-time jobs can be provided to another 10 lakh individuals all over India as part of the gig economy.
The employed individual will be engaged in the following significant aspects and will work in association with existing GST departments all over India.
- Free GST filing
- Billing machine and barcode machine servicing
- Regular data transfer and inventory assistance
- Tutoring people in using billing technologies
- To ensure that all shops are billing per GST, regular inspections should be organised in compliance with state and central tax authorities.
- Providing packaging materials and carry bags according to necessity.
- IT support for all businesses in India.
- Free customised items such as diary and calender for service providers such as clinics, tuition centres and laundry centres.
Smooth Business Experience for Small Businesses All Over India
When the government ensures that all businesses are brought under formalisation, the government should return the favour to them.
- The first step is ensuring the above areas, such as free GST filing, free inventory & stock management software, and free billing machines.
- EAC Integration Centre will have TV advertisements in their office adboards, and all the businesses within its limit will have free advertising of their products in turn.
- No politically organised labour unions will be allowed on the premises of any businesses. In case of the presence of any labour union that the business owner disapproves of, they will be forcibly removed. The communists in Kerala are harming Kerala business people by engaging in disruptive practices such as goonda activities. Such activities should be taken down, and if police are inefficient in protecting business people, armed forces should be made readily available to businesses. All business establishments above a particular number of staff will only have labour unitary unions formed based on labour interests, not political interests. None of the protests should affect the business hours of businessmen, and in case of doing so, the owner can terminate such employees.
- Donation collection from shops will be banned, and engaging in such actions will be added to severe punishments. Many religious organisations, NGOs and political parties consider business people their cash cows and threaten to harm them for quick money. A total effective ban on them will ensure that business people can do business with peace of mind.
- Grey solvable’s legalisation should be enforced to help small businessmen overcome small-level legal obstacles.
- The panchayat/municipality/corporation license fee should be minimal or nil.
- Bureaucratic individual accountability will ensure a countermovement in which the government reaches out to businessmen to solve business issues such as electricity, water and licensing issues.
- The interest-free credit system will be introduced to ensure enough money is available to small businesses. It will be similar to the concept of the revolving line of credit.
- Creating a night economy with extended hours will also help business people make additional income from additional working hours.
- Free packing materials should be supplied to all small businesses, including their shop and business name on the packing materials. This will help in aesthetically advancing small shops’ businesses.
- Customer EWS purchase system and EMI system can be installed in all small shops. Today only larger shops provide formal credit for purchasing items, but under the new system, small shops can also offer credit under this system. Many shops in rural India give informal credit to their customers as the people who purchase items are regular customers. But if the customer delays the payment, the rolling money of the shopkeeper is affected. In the new system, the government will remove the credit offered by shopkeepers to the public, which will relieve shopkeepers and replace it with the EWS system and EMI system. Easy Weekly Settlement system or EWS system is a system in which customers will take credit for seven days for up to 5000 rupees to settle the amount of the shop owner. Once the customer pays the amount to the card issued by the bank, the amount will be refilled. Settle on the 8th day after taking credit, and there will be no interest for the amount. The amount will be refilled on the 8th day itself. If different amounts are taken on different days from different shopkeepers, then each amount will have an 8th-day rule. EWS system should be available only for small brick-and-mortar shops below 500 square feet. Current EMI methods can be used in the case of EMI for more significant amounts.
- All the benefits for the businesses should be implemented first, and GST should be implemented for all only after the benefits are provided.
- Bar code should be mandatory for all packed items, including food items. It is to ensure that billing in shops will be faster and smoother. Small manufacturers and shops will receive free barcode printers and readers.
Taxi and Goods Vehicles GST System
All taxi services and goods vehicles should be taxed, and a mechanism should be developed to implement it efficiently. Five per cent should be the optimal amount of tax. In addition, a GST number should be allotted, and TSS should handle all tax matters on behalf of that individual.
Different rates for urban taxis, rural taxis and night trips can be allowed. However, the fare for taxis should not be decided by the government. Instead of that, the unitary union of each taxi vehicle should submit their rates which will come into force. The rates can be changed every quarter if they need it.
The government should supply the devices used in billing customers, such as taxi meters, for free. The government will also do the maintenance for free. The data from taxis will be synced regularly by TSS, and EAC centres can facilitate this process.
The machines provided for free should be so simple to understand and operated for taxis.
Road tax, welfare board tax and similar taxes should be removed for all taxi vehicles.
The government can analyse the income of the people engaged in taxis and goods vehicles. It can help the government relocate people to other businesses, especially for those making lesser income from such taxis.
Social Ceremony Luxury Transaction GST System
All social ceremonies, such as marriages, will have an 18% transaction tax. The transaction tax will be separately applicable for catering, hall booking and other luxury expenses. The event organiser will be charged along with charging the caterers and event hall owner. If the number of event participants crosses 100, then the luxury tax system will charge 50 per cent as transaction GST. It includes if people come, whether in batches or combined at the same time. In India, many parents are in debt only because of expenses incurred during the marriage of their daughter. This taxation system will ensure that events are conducted on a smaller scale and people do not end up in debt. TSS will take a video of events to decide the taxable amount. The event organiser will declare the value of the event, and if TSS is convinced of that amount, the GST will be calculated based on that.
Printing, Distributing and Maintaining Receipt Books
All charitable organisations, religious organisations and political parties must buy government-provided receipt books to collect funds. When funds are collected, and receipts are provided, they need to upload the amount to the serial number of the receipt to the provided website. So, when a person pays for a charity, the amount is written on the receipt, and the bill is provided. Once the person leaves within 72 hours, the amount is needed to be added to the website to the receipt serial number. Receipts will have a barcode that can be scanned for uploading serial numbers. Receipts will also have a QR code.
A barcode scanner will be provided for free, and training to add the amount to the website will be provided. Any other billing for all over India for any organisations will be banned. There will be frequent inspections, and it is easy to catch people violating the norms. For example, if a donator is cheated by lowering the amount on the bill when the amount is entered online, then the donor can find out by scanning the QR on the receipt. The receiver of payment should compulsorily update the amount details within 72 hours. This payment collection system is supported by TSS, and 18 per cent GST is applicable for the income collected.
Influencer and Gift Addon Transaction tax
All social media influencers and celebrities endorsing brand products should register for GST irrespective of turnover, and the endorsement income will attract an 18 per cent tax. All gift items received by influencers will attract additional GST. So, this amount is above the GST already paid by the gift provider. For example, if MacBook is gifted to an influencer, 10 per cent Gift Addon Transaction GST will be applicable along with 18 per cent interest already paid by the buyer of the MacBook. TSS will assist all emerging social media influencers in applying for GST registration and supporting filing GST for free.
Route Agents Support System
The route agents are people who deliver items regularly to shops from wholesale providers. The billing software should be designed so the producers of items can add expiry dates and various details when transferring to wholesale agents. The wholesale agents will use the software and provide items to shops via route agents. So, when a route agent is visiting a shop, they should be able to deliver items that the shop needs and sync the data regarding the transfer with the billing computer of the shop. In this system, route agents have less waiting time in front of each shop. Tab-like devices will be provided for free to route agents. They can select and transfer items from their stock to the shop using the tab-like device, and it is the highlighting feature of the route agent support system. This tab-like device should have a data transfer facility and offline feature in case of the shop does not have an internet facility. Therefore, even if the route agent and shop do not have internet, the data transfer regarding items should happen, and they can sync with the internet later.
Many vehicles supply different products at the same time. For example, a goods pickup supplies different grocery items. So, TSS will create an online mechanism where the public can request the route agents add their products to their supply list. If route agents approve the commission structure, such products can be added to the route inventory. Route agents will also come under the ambit of GST. TSS will assist route agents in filing GST returns.
Special Note: This is the twenty-first chapter of the book New India Manifesto by Blessen T. Sam. The concepts introduced in this book are unique, and referencing the book and the author is appreciated. Support the hard work of the author to modernise India by purchasing a print copy of the book from Amazon or Flipkart.