No doubt introduction of Goods and Service tax (GST) is one of the biggest and important tax reforms in the history of indirect taxation in India. From the date of its coming into force i.e. 01.07.2017, GST has come across several changes and still is in work-in-progress stage. However, it is about 18 months old but is still under intense scrutiny; let’s take a look at the journey of this major reform in the Indian economy and the way ahead.
The GST is truly a game changer in indirect tax regime as it has replaced multilayered i.e. 17 taxes levied at center and state level, complex indirect tax structure with a simple, transparent and technology driven tax regime. With this it is aimed at integrating India into a common and single market by breaking barriers to inter-state trade and commerce. Further the ultimate goal of GST is enhancement of ease of doing of business by removing cascading effect which is commonly known as tax on tax & reduction in transaction costs which will further provide boost to “Make in India”. In nutshell, the vision of GST is “ONE NATION, ONE TAX, ONE MARKET”.
To a certain extent GST is successful in achieving above mentioned goals. As per Economic Survey 2017-2018, the number of taxpayers has been increased to 3.4 million leading to increase in tax base for Indian exchequer. GST also fastened economic growth but a large part in the form of fuel, electricity, land and real estate excluding construction contracts is out of the purview of GST & is not contributing to revenue receipts.
In its journey of 18 months, it is not left untouched by criticism. One, that there is multiple tax rate slabs with the highest rate of 28% which is against the initially proposed cap of 18%. But it is countered by the Government by saying that the tax rates on about 97% items have been reduced from 31% to 18%. Second, that GST was introduced in very hasty manner and without preparation. This is evident from the fact that number of times tax rates have been changed & so frequent that it lead to impression that rates were fixed arbitrarily & without any justified rationale of fitment of commodities. Thirdly, that it resulted in hardship for small traders & businesses as is evident from the fact that there was unfamiliarity with the new regime and IT systems, return filing and reconciliations, passing on transition credit. Lack of robust IT infrastructure and system delays affected the compliance by taxpayers.
Apart from these criticisms, the Government keeps on working to make it taxpayer friendly. The transparency in computing tax amount benefitted the consumers so that they are not exploited by the businesses. Cross utilisation of ITC was the hallmark feature of the GST helping businesses. Although, the frequent changes in tax rates caused hardship but the incidence of tax on many items of daily use were lowered. As per Government, these rate cut amounts benefit of around Rs. 80,000 Cr. But the issue of passing off of these rates cut benefits to the ultimate consumer is an issue of concern.
Also, the initiation of investigation by National Anti-Profiteering Authority (NAPA) into complaints filed by consumers & working as watchdog over anti profiteering practices of businesses to protect consumer interest is a plus point. For example, the recent imposition of Rs. 383 Cr. Penalty on Hindustan Unilever Limited. Successful implementation of E-Way bills for inter-state and intra state movement of goods helped in smooth flow of goods, enabling manual filing & processing of refunds t0 expedite sanction of refunds and putting in place IT grievance redressal mechanism for addressing technical difficulties faced by the taxpayers.
GST council throughout the journey of GST made continuous efforts to make the GST a successful reform through its various recommendations. Recently, in its 31st meeting press conference it was indicated by the finance minister that in coming time 12% and 18% slab rates may converge to a single standard rate and to phase out 28% slab rate except on luxury and sin goods.
It is also proposed that in coming time consumer may get separate bills for both taxable and non-taxable components of bill for benefit of consumer. This proposal of unbundling of services in bills was considered in respect of healthcare sector but the council wants to extend it to all the exempt services.
It was also hinted that the council can consider inclusion of crude oil, petrol, diesel etc. when the revenue receipts improve. It is also expected that from 1 April, 2019, new system of filing returns is to be introduced on trial basis which is expected to eliminate all the flaws of the current return filing system.
However, after all these expectations the coming 2019 Lok Sabha elections will have great impact on further road map of GST as if the present government continues then it is expected that it will focus on increasing revenue receipts as current collections are not upto the intended collections and if doesn’t then the new government is likely to set new goals to be achieved by it. But till now, it is too early to judge whether the earlier regime was better or GST as we have already stated above that it is still in work in progress stage.