Recently, the Central Board of Indirect Taxes and Customs (CBIC) decided to commend about 54,000 taxpayers to celebrate the completion of four years of Goods and Services Tax (GST). The move highlights the significant achievements and persistent challenges associated with GST.
Key Developments in GST Performance
Over the past four years, there have been many notable improvements in the performance of GST. Its automated indirect tax ecosystem, thanks to e-way bills and the crackdown on fake invoicing, has brought in sizable GST revenues that were previously unaccounted for or under-reported. It’s anticipated that the forthcoming e-invoicing system will simplify compliance even further.
Simplifying Compliance Through Innovative Initiatives
The CBIC has introduced various measures that streamline tax compliance. These include linking the customs portal with the GST portal, which ensures credit availability on imports, enhancing the automation of the refund procedure, and improving the operations of the Invoice Registry Portal.
Functionality and Agility of the GST Council
Throughout these four years, the GST Council has proven to be functional and agile. It has made law corrections, provided clarifications on complex issues, rationalized GST rates, and introduced relaxations to cope with the Covid-19 pandemic.
India: A Global Role Model in Tax Transformation
By successfully executing one of the most complex tax transformation projects, India established itself as a global example. However, this transformation has not been without challenges.
Challenges of GST Implementation
Various hurdles have marked GST’s journey to date. Fiscal Federalism became a contentious issue when GST collections dropped during the pandemic. In addition, the 15th Finance Commission has exposed multiple areas of concern in the GST regime, from multiple tax rates and inconsistent return filings to states’ reliance on central compensation.
Indirect Taxes: Impact on Businesses
While the GST law promises seamless flow of input credits and ease of compliance, IT glitches have hampered its implementation. Indirect taxes such as GST do not distinguish between the rich and poor, leading to higher burdens on the less affluent. Small and medium businesses are particularly struggling to adapt to this tech-fueled regime.
Proposed Improvements for the GST System
As oil prices surge across the country, policymakers are urged to consider incorporating petroleum and related products into the GST framework. There is also a need for more streamlined anti-profiteering measures and simplification of compliance procedures.
About Goods and Services Tax
Implemented on 1st July 2017, GST is a value-added tax imposed on most goods and services sold domestically. The tax is paid by consumers but remitted to the government by the selling businesses. It has been a major tax reform in India, subsuming almost all domestic indirect taxes under one framework.
Distinctive Features of GST
GST applies to the supply of goods or services, replacing the old concept of taxation based on the manufacture or sale of goods or provision of services. It marks a departure from origin-based taxation to destination-based consumption taxation. It’s a dual tax levied both by the Centre (CGST) and the States (SGST). The GST Council, a constitutional body, recommends GST rates which are then mutually agreed upon by the Centre and the States.
Impact and Reforms Brought About by GST
GST has created a common national market, eased the cascading effect of taxes, and reduced tax burden on goods, thus making Indian products more competitive domestically and internationally.
Continual Improvement of the GST Law
Although significant strides have been made, the GST law is still a work-in-progress. Continuous efforts will be required from the government to fulfill its promise of a ‘Good & Simple Tax.’
