Goods and Services Tax (GST) is an indirect tax (or consumption tax) levied in India on the supply of goods and services. GST is levied at each and every step in the production process, but is refunded to all parties in the chain of production other than the final consumer. The tax came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Indian government. The tax replaced existing multiple cascading taxes levied by the central and state governments.
Implementation of GST is one of the major tax reforms in India as it changes almost entire Indirect Tax structure of the nation. During the launch of GST (on 1st July, 2017), The Hon’ble Prime Minister Narendra Modi described GST as ‘Good and Simple Tax‘ and stated it as country’s largest tax reform since independence.
Is GST is Good and Simple Tax?????
Now, let us evaluate whether GST is really good and simple like our beloved prime minister mentioned during its launch.
GST has huge impact on Indian economy. Under the GST bill, the Indian economy will see an economic integration. One will see all other taxes getting consolidated into one, it will restructure the indirect taxation, making the taxation process humbler. So, instead of paying, Octroi,Service Tax, Central Excise VAT i.e. the value added taxes etc…, including few other indirect taxes, the taxpayers will only pay one amalgamated tax.
It almost nullifies the cumbersome of compliance procedure under various taxes by introducing simplified return procedures. There is no need to file separate returns for Service Tax, VAT, Excise duty…etc.
The registration process also simplified as most of the Indirect taxes are merged as one. There is no requirement to get separate Registration for all the above stated taxes.
- GST makes the transaction more transparent. Enabling sales invoices to show, the tax applied.
- GST reduces the cost of doing business, as it eliminates most of the hidden charges.
- GST willreduce the cost of things, as a result, consumption might increase, helping companies increase their production.
- Earlier, the split between taxes for manufacturing and service charge is very complicated. With the application of GST all the taxes will be integrated and perhaps it will become possible to split the manufacturing and services tax burden equally.
- GST is more of compliance in nature which will make it more transparent and corruption free.
- Regular amendments to GST like implementation of E-Way bill make the law more effective.
Challenges in GST:-
There is a lot that is predicted by economists, and there is a lot of dust in the air with regards to the immediate and long-term impact of the GST bill. It’s only when the dust settles, one will see where we stand. However, it can be said with surety that there will be a significant amount of transparency and ease in the taxation process for the taxpayer as there is no sufficient awareness among the people about the compliances and applicability of the Act.
One of the challenges being faced by the tax payers under GST is about claiming of ITC in the case of Reverse charge. Different people from different sectors have different opinions on the same issue based on their respective interpretation of the act, which is also leading to the blockage of huge working capital of the company for one month at least.
Although GST have huge positive impact on Economy as a whole it also have negative impact on some sectors, the cost have risen leading to negative growth. The govt. departments were not clear about the tax incidence in respect of ongoing works contracts leading to non-payments to contractors. But all these impacts are gradually diminishing.
E.g.:-Particularly the provisions like reverse charge on supplies from unregistered suppliers (Sec.9(iv) of CGST Act,2017) will make un necessary negative impact on most industries and will lead to blockage of working capital of the company.
Classification of Goods and Services and Rate allotment is also been a challenge in respect of some small industries which need to be take care of.
Role of Government:-
Government has been continuously updating the GST law by amending the act time to time. It introduces The GSTN software which is developed by Infosys Technologies and IT network is maintained by the NIC. “Goods and Services Tax” Network (GSTN) is a sophisticated network, accessible to all the taxpayers to access information from on a single source (portal) on regular basis. The portal is accessible to the Tax authorities also for tracking down every transaction, while taxpayers have the ability of connect for their tax returns.
Government also facilitates the GST suvidha provider services wherein it can provide return filing services through GST Suvidha providers by giving them proper training and certifications and also conducts seminars and real time call assistance on queries of tax payers to make them more comfortable with compliance procedures.
However there are certain issues on which the Government yet to be focused. Although the return procedure under GST is simplified, the hefty compliance part will have possible negative impact on small and medium enterprises. Tracing of tax evasion and fraudulent claiming of ITC by issuing duplicate and fake invoices is also the significant challenges before the government on which The GST Council and the government need to look into.
GST is the first of its kind system in the country when both Centre and State shall be putting consolidated efforts in the same direction. We shall be proud of this wonderful system for generations to come as GST is a landmark achievement which is bound to take the nation towards exponential growth. GST is “GOOD AND SIMPLE TAX” which can be a boon to our economy if we implement in effective manner.