The concept of ‘one nation, one market, one tax’ has become a reality with the introduction of GST (Goods and Services Tax) driven reforms. GST is aimed at eliminating the cascading of taxes, i.e. levying of another tax on already taxed products or services.
End To Hidden Indirect Taxation Regime
You can assume that the GST’s purpose is to get rid of all ‘hidden’ charges extracted in the name of different indirect taxes. GST is a value-added tax which is levied on the exact amount of extra fees at various stages of service delivery or goods’ supply.
Input Tax Credit For Claiming Any Extra Or Hidden Charges Levied
Within the supply chain, GST is applicable only on the quantum of value added at every stage. This essentially implies that you can bring down your tax liability on output by discounting the taxes paid for inputs.
You can reduce your tax arrears by removing ‘hidden’ or extra taxes paid earlier.
For example, if you are a shoe manufacturer, your final tax on revenues from selling finished shoes shall be computed only after deducting taxes paid on procuring leather, other raw materials and other services.
Claim your refund whenever taxes on purchases exceed that on sales.
Complete Transparency On Taxes Paid
Before the implementation of gst in india, you could see only the taxes levied by the state on the maximum retail price. The different embedded charges were not visible to you.
The transparency brought in by GST offers you absolute clarity on actual taxes payable, i.e. freedom from hidden charges.
Since entry related restrictions for goods along state borders have been done away with, you are no longer required to pay any overheads or unaccounted for ‘hidden’ amount during cross-border transportation.
Mechanism Of Anti-Profiteering
As a consumer, if you feel that the merchant is not passing on the benefits of tax reduction to you or deliberately charging higher prices for goods, you can complain to the anti-profiteering authority. So, if a merchant tries to dupe you in the name of hidden GST charges, you can seek help.
The authority will look into your complaints. If the charges are established, the authority will instruct the supplier to reduce prices and return the additional tax charges with 18% interest. They may even cancel the GST registration of the supplier.
Provision Of Penal Charges
You might have come across instances when you have to shell out additional charges as a penalty for delayed payment or supply. Such expenses can be classified as ‘hidden’ because you are often in the dark regarding the actual amount.
The GST Act categorically mentions through Section 15(2)(d) that supply value can include the penal amount or late fee or interest accrued due to delay in payment for a particular supply or consideration. The procedure for computation of punitive charges is clearly mentioned.
Further, Schedule II’s Clause 5(e) specifies the nature of activities which will not attract penal charges. Such actions require traders to enter into an obligation for ‘refraining from an act, or tolerating a situation or an act, or doing an act’.
Tolerating an act refers to instances where you are charging consideration to facilitate another person to carry out any specific activity. Hence, the scope for application of hidden penal charges is done away with at the very start of any transaction. No deterrence in the form of hidden fees will be present.
The Obligation Clause
In Clause 5(e), the term ‘obligation’ eliminates any dubious or ‘hidden’ charges if a time-bound professional commitment fails to be honoured unwittingly.
The service recipient can ask the provider of service for tolerating a situation or act which the former believes can lead to unwarranted delays or deviations. If the service provider factors in consideration for agreeing to abide by the same, the professional relationship shall be immune from penal charges.
If there is a further breach of contractual terms or payment default, the service provider must pay the penalty. Such amount is pre-defined in the GST manual to save all parties from hidden charges. Serial No. 27 of GST notification issued on June 28, 2017, covers such penal interests.
Further, there shall be no GST implication for penalties charged by a lender for default in a monetary transaction. To steer clear of the prospect of being subjected to unwanted hidden charges, you must complete the gst number verification.
The realm of GST is comprehensive. It cannot be possible for you to remain updated about all the terms and conditions governing the implementation of GST. But, you can safely assume that the GST regime shall not expose you to hidden charges that are unjustifiable and unwarranted.