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What's the article about?
- It analyses the progress made by the GST on its sixth anniversary.
Relevance:
- GS3: Government Budgeting; Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment;
- Prelims
Context:
- Touted as one of the biggest tax reforms, India’s Goods & Services Tax (‘GST’) turned six on 1st July 2023.
- Revolving around the “One-Nation-One-Tax-One-Market” theme, this unified taxation regime has come a long way.
Analysis:
- Introduced soon after the demonetisation shock, the GST was viewed as another disruptor for the informal economy and its initial technical, structural and procedural challenges took a while to sort out.
- That all businesses with annual turnover of ₹5 crore will have to generate e-invoices starting this August, and that there has been no ostensible pushback from smaller businesses over this, indicates that firms have gradually embraced the change.
- The Revenue Department’s crackdown on fake invoicing and other techniques deployed by tax evaders may compel the few outliers to fall in line too.
Positives achieved by GST:
- Single indirect tax regulatory framework for businesses, reduction of cascading effect of taxes, digitization of compliances, and federal cooperation are a few highlights of the GST regime.
- From a revenue standpoint, this tax reform has witnessed a considerable increase in average revenue per month including in most cases during the pandemic year 2020-21.
- This June (2023), GST revenues crossed ₹1.6 lakh crore, only the fourth such occasion in its 72 months’ existence, lifting the average collections in the first quarter of this year to nearly ₹1.7 lakh crore — a healthy 12% over last year’s kitty.
- For businesses as well, this tax reform has emerged strongly after facing significant turbulences in the initial years.
- With stability in IT systems for various e-compliances including e-invoices, e-way bills, etc. to proactive clarifications on tax positions by the government to automation of most compliances with minimal human intervention, this reform has traversed its path through peaks and valleys.
- Trade facilitation measures for small businesses such as filing of NIL returns through SMS, quarterly filing of returns, optional filing of annual returns, etc. have further added to ‘ease of doing business’.
- Certainty for businesses with a focus on ease of compliance has been some key highlights in making this a truly significant tax reform.
Challenges which needs to be addressed:
- For taxpayers and consumers, however, much remains to be done till the GST can be considered a Good, Simple Tax.
- GST Compensation cess levies have been extended till at least March 2026, instead of the initial five-year tenure, due to the transitory shock of COVID-19 lockdowns on revenues.
- Dispute resolution remains a pain point for industry, with GST appellate tribunals still not set up.
- There is no road map in sight on the rate rationalisation exercise or the inclusion of excluded items such as electricity, petroleum and real estate, without which the efficiency gains from the GST remain constricted.
- The GST Council needs to meet more often and turn its to-do list into a must-do list expeditiously.
Way Forward:
- To sum up, in spite of roadblocks in its journey, GST has altered the landscape of indirect taxes in India and with the right direction and reforms one can positively hope its future journey will only get smoother and have a great positive impact on the Indian economy.
