The GST regime is here, and so are the heartburn, problems, issues of compliance, etc. for the last 3 months since its implementation. As was expected and is usual, there are some genuine problems being faced by tax payers due to glitches, convoluted tariffs, first time tax payers, etc. The degree of angst being faced must be high for so many furors to take place. Hopefully, things will settle down in the next 2 months.
This blog is not about GST, but is on my experience of compliance issues, of my industry, which, admittedly is very small and niche: Marine Training. This is a short story of the compliance rules that have come about in the last 12 years, although they have only been enforced in the last 30 months.
In 2003, a decision had been taken by the authorities to take our industry digital, as most of the participants of our industry work in international markets, where this was a necessity. The first step towards this was to create a data base of all those who were undergoing training in this industry, as the same was not available. All the institutes were brought on board and explained to in detail in the beginning of 2004. The data base was to be created for each individual, which would be available for employers to check the authenticity of certification and the candidate would not have to carry certificates with them. The number generated by the database would identify the candidate, and was made compulsory.
The authorities forgot about it for 2 years, and the institutes also did not take it seriously. Then suddenly, out of the blue, the authorities woke up. Compliance of this was made mandatory with immediate effect, at a week’s notice, setting the cat among the pigeons. The institutes made representation to change the date, but to no avail. With no alternative, Institutes got down to compliance with rules. Lot of teething troubles with software, hardware and Government manpower meant a real disruption in the industry for about 4 months. The loss in business, in some institutes touched 25%. Personally, did not affect our institute much, as we had taken a decision to be compliant with all that was needed, and hence we were ready with it. Nominal losses of 5-7% are accepted part of business.
Once compliance become regular, the industry found that business was booming. Institutes which were running at half capacity were now running at 90%. It was astonishing and unprecedented for all of us. The reason, we came to know about a year later was that fake and spurious certification had been rampant and had stopped a great deal. Middle men and touts who were fleecing candidates were out of business, and naturally, that business was diverted to genuine, accredited institutes. The smaller institutes, like us, were the ones who got the maximum benefits. And each of the institutes made it sound like how much they supported this move, forgetting the representations made to even central ministers for postponing the same!
The first experience of compliance had been an all-round success, but the same had to be hammered and not cajoled.
The above compliance rules were that getting the database number was the job of the institute and it was the candidate’s job to get their certificates uploaded. That meant multiple visits to the authorities, with its varied harassment in all forms. It had been found, that with “Jugaad” and ingenuity , fake certificates had made a comeback, as it was virtually impossible to verify the thousands of certificates being proffered.
After the economic collapse of 2008, when there was a crisis in the industry, the foreign principals started to check the database increasingly for employment, and this fake certificate racket was exposed. In 2011, the Government was forced to come out with the 2nd stage of compliance rules. The institutes were instructed to upload all the certificate details of the candidates. A software was provided, and it was decried that institutes had to do the same within 30 days of issuing certificates. No institute, even us, took it seriously. Compliance was in fits and starts and depended on the periodic inspections that the institutes had to go through by the authorities. We had a regular backlog of 6-8 months, some institutes never even got round to doing it. And the same continued for next 3 years.
In November 2014, the authorities came out with its toughest instructions and gave us a month to be compliant or face closure. No one still, took it seriously, as this had been heard previously for nearly 4 years. On 24th December, circular was issued that we had a week, before closure, and the proverbial shit hit the fan. All institutes went into overdrive, and the system hardware collapsed!. Most institutes worked 24×7 to get it done, including us, but were not successful. And on 1st January 2015, many of the institutes, including us were given orders to suspend classes till the work was completed. But this was relaxed for a period of 7 days. In this grace period, all institutes, except 3 managed to do the needful. This also coincided with new rules from the international body and business boomed even more. The fake certificate industry was dealt a body blow, and is still to register a comeback.
Things continued the same for about 2 years. Then the authorities decided that the details had to be submitted and uploaded on the day the course finishes (Most of the courses are short durations, ranging from 1 day to 15 days). This was a very severe blow to small institutes for 2 reasons, 1 legitimate and the other completely illegal. The legal reasons can be summarized to the fact that the course gets over at 5.30 and the window for uploading also closed at the same time. It was not possible to complete the task. On their part, the authorities stated that due to security reasons, they do not have uploading status from 5.30 PM to 9.30 am. The order was kept in abeyance for a month to find out a way.
The illegal reason was the fact that institutes were signing on candidates after the course dates had ended, and this gave them extra revenue. Somehow, this fact also came to the notice of the authorities.
And then came the hammer. Orders were issued to upload the courses on the first day of the course by 10 am (courses start at 9 am), after which the window for uploading would close and courses would not be uploaded, making them useless for everyone. This order was strictly to be implemented from a given date. The authorities refused to relent on anything in this case, not even to increase the window timing to 11 am.
Left with no choice, the institutes started to upload the details as per the given order. Conferring with some other smaller institutes, the attendance in courses dropped from about 75% to below 50%. But some institutes stayed strong at about 90%, the same as before.
Some institutes, now, just after a month of this compliance are feeling the pinch, very badly. But, on the whole, the business has become very much cleaner and reputation of Indian institutes in international forum has gotten better. Win for most, losses for a few.
The above narrative is not on the rights/ wrongs or otherwise of anyone. It is to make the point that unless forced to, Indian Businesses seldom likes to comply with rules. And when forced to, most, if not all, adapt very fast. And after adaptation, am sure, some may even be able to get back to their “Jugaad” and try to game the system also. That also is a very Indian trait in Business.
This is in a business, where there are no taxes , no GST or Income Tax.
But, we are like that only
What do you think?