The latest GST revenue data highlight uneven consumption growth across Indian states, indicating possible discord in national economic recovery. This article explores the main points from recent GST-related data, explains what GST is, its benefits, and outlines the current challenges associated with GST in India.
Insight into the Recent GST Related Data
Overall GST collections saw an increase of 11.7% in the first three quarters of 2023-24 compared to the same period in 2022-23. State GST collections recorded a higher growth rate of 15.2% compared to Central GST, implying different consumption patterns across the states.
There exist sharp disparities among states regarding GST collections. Madhya Pradesh, Maharashtra, and Karnataka demonstrated robust growth of 17% to 18.8% in state GST revenues. In contrast, Gujarat, West Bengal, and Andhra Pradesh witnessed sluggish growth or even decline.
According to the National Statistical Office (NSO), private final consumption expenditure (PFCE) growth for the year was projected at only 4.4%, marking the slowest growth since 2002-03, barring the pandemic period.
Implication of Goods and Services Tax in India
GST is a comprehensive indirect tax levied on the supply of goods and services in India. Introduced on 1st July 2017 through the 101st Constitution Amendment Act, 2016, it operates under the slogan ‘One Nation One Tax’. The GST slabs for regular taxpayers currently stand at 0% (nil-rated), 5%, 12%, 18%, and 28%, with less common rates being 3% and 0.25%.
Benefits of Implementing GST
GST simplified the tax regime by replacing numerous indirect taxes, thus easing paperwork for businesses. The online GST portal has increased transparency and reduced tax burdens for consumers. By eliminating tax barriers and improving efficiency, GST is expected to stimulate economic growth and create more jobs.
The GST Council is a constitutional body formed by the President, responsible for making recommendations on matters related to GST implementation in India.
Challenges Linked to the GST Implementation in India
Despite its advantages, GST in India poses some challenges due to its complex structure with multiple tax slabs resulting in increased compliance requirements. For businesses, especially smaller ones, this complexity can make understanding and adhering to diverse regulations difficult.
The successful functioning of GST depends greatly on sturdy technological infrastructure. Disparities in technology adoption and lack of technological readiness among businesses can hamper the seamless operation of the GST network. Businesses operating across multiple states must register separately in each state for GST compliance, which increases administrative burden and compliance costs.
Input Tax Credit (ITC) Verification is another challenge as government authorities have recently identified over 29,000 fraudulent firms involved in evading GST dues.
Looking Forward: Measures to Address the Challenges
To address these challenges, it is crucial to simplify and rationalize the GST tax structure by reducing the number of tax slabs. This would ease businesses’ compliance and promote clearer understanding of tax obligations.
In terms of compliance procedures, efforts should be made to streamline processes, harmonize return filing procedures, ensure timely refunds, and implement user-friendly interfaces for tax filings.
Moreover, a strong focus on anti-evasion measures is necessary to curb tax evasion through fake invoices and fraudulent activities. Using advanced data analytics and technology to identify suspicious transactions and implementing stringent penalties for non-compliance could deter such practices.
