Explore the six-year journey of GST in India, its impact on the economy, and the challenges faced. Discover the benefits, including formalization of the economy and MSME integration, along with areas for improvement such as setting up the GST Tribunal and rationalizing tax rates.
It was a historic landmark day 1st July 2017 when GST was introduced with much fanfare at midnight by Prime Minister Modi & then President Mr. Pranav Mukharjee meant to realize the “One Nation-One Market-One Tax, Simplifying Tax & Driving Growth” plan. GST has subsumed 17 Taxes and 13 cesses levied by the central and state governments, has not only helped in reducing tax burden on the citizens but has also proven to be the engine for driving consumption in the country. Country of 29 states & 7 union territories has pulled off the transformation given short preparation of time.
After six years, GST has not stabilised and delivered on many of the objectives even though its full potential is yet to be realized. In 6 years, the taxpayers base has been increased from 63 Lacs to 1.4 Crores even after increasing threshold exemption limits. GST monthly average revenue has grown from Rs. 89,885 Crore from 2017 to Rs. 1.5 Lakh crore in the last financial year touching a record of Rs. 1.87 Lakh crore in April 2023. Now Rs. 1.5 Lakh crore monthly GST revenue is new normal.
Multiple benefits have been seen due to GST rollout. Among all the benefits, I feel some of important benefits are
- Formalization of the economy: It seems that big is getting bigger. Whoever is entering the formal economy, their business has increased due to the open market all over India.
- Positive impact of GST revenue growth on direct tax revenue: This is from the fact that there is an improvement in first level of compliance by taxpayers. Compliance level was increased to almost 90% in April 23.
- Ensuring MSME integration in Supply Chain: It is helping MSME to do business all over India including E-commerce due to single GST registration. GST has yielded huge benefits to our businesses in terms of removing artificial trade barriers and reducing logistic costs.
- Digitalization of returns & data: The digitized system of GST filing has stopped tax evasion in both GST and Income Tax. The phenomenal growth in individual income tax recently can be attributed to this. E-invoice & E-way bills have ensured transactions are getting recorded with the government through digitized ways on a daily basis which is helping in increasing tax compliance and increasing government revenue.
- Reduced impact of Cascading of tax impact: In the pre-GST era, the total of VAT, excise, CST and their cascading effect led to 31 per cent as tax payable on an average, for a consumer. With reduced taxes, GST brings happiness to every home. Relief through GST on various consumer goods of daily use. The benefits ensured reduction in prices of various goods and services.
As there are many benefits of GST, we are still facing some challenges in GST where the government can work on it. It will help crores of taxpayers to resolve their issues & it will be real Good & Simple Tax. Following are some important areas where the government can work for betterment of GST.
- Urgently setting GST Tribunal: GST implementation has been completed 6 years but GST Appellate Tribunal has not been established in its place. Though the Center has completed its legal groundwork, states are in process. Due to non-formation of GST Tribunal taxpayers are facing difficulties to file Appeal against Order passed by the First Appellate Authority and unnecessary litigations are getting piled up day by day before the Hon’ble High Courts across the country.
- Rationalization of GST rates: The multiple rate structure (3%, 5%, 12%, 18%, 28%) conceived issues such as inverted duty structure, litigations around classification and rate related issues, supplies of public interest being taxed at a higher rate of GST, cascading effect of taxes, etc. Though the GST council has formed a Group of Ministers (GoM) to undertake exercise of rate rationalization, but till now no concrete steps has been taken on it. Despite numerous rationalisations undertaken over the 6 years of GST, the GST treasury has only seen an upward trend except for the year 2020, when the entire globe was hit by the COVID-19 pandemic.
- Coordination between Center & State authorities: When the Central Government is going to issue Notifications and Circulars for implementation of certain new provisions and procedures, which needs simultaneous approval by the States Government and to notify / issue circular at the States level for the new provisions. But it was not happening or followed by most of the State GST authorities.
- Stabilized IT infrastructure: The whole GST system is based on IT platform but infrastructure is not upto to the mark by which taxpayers are facing filing monthly returns. Only waiver of late fees and penalty without improvement of IT infrastructure has no end to the problems of the taxpayers. In view of increasing the number of registrants and implementation of e-returns, e-invoices, e-waybills so timely compliances by the all the taxpayers on GST common portal, there is need of further enhancement of IT capacity of GST common portal.
- Subsume remaining taxes in GST: Still there are multiple taxes (Electricity duty, excise duty on petroleum products & liquor, stamp duty etc.) which have not been subsumed in GST. Cost effects of these duties are still felt in all businesses. To truly achieve the motto of “One Nation – One Tax”, the government should subsume all these taxes in GST.
The government also needs to put in place measures to assist the taxpayers in complying with and resolving their grievances more meaningfully. That would add further to the appeal of GST as a fair and transparent tax. Government is in process of evolving & improving GST through continuous feedback mechanism from all stakeholders and its will to achieve real benefits, we are sure that all the issues of stakeholders will be addressed in future.
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