“In this world nothing is certain but death and taxes” said Benjamin Franklin. The biggest indirect tax reform post-independence Goods and Service Tax turns one on 1st July, 2018. One year of GST implementation has not been less than a topsy turvy ride for the implementation agency, the taxpayers and the GST Practitioners. The multiple amendments in regulations, teething problem of the GST Portal, inherent issues in GST has given sleepless night to all the stakeholders. However it is rightly said “What Comes Easy won’t last long and what last long won’t come Easy”. It is very much true for GST which has been implemented in India which has a Federal System of Governance and complex geographical and consumption dynamics.

Gains of GST:

1) Unified Indirect Tax: The biggest achievement of GST is that it has subsumed all major indirect tax in the country like Excise, VAT, Service Tax, Luxury tax etc. into GST. This has resulted into GST becoming a unified indirect tax law in India. Though Customs Act, VAT for Petrol/Diesel/Alchol and other local acts are still in operation in various states, all other major indirect tax has been replaced by GST. It’s a major step towards making India – One Nation One Tax.

2) Common Market: With GST in place the goods and services are uniformly classified across the country whereby India has become a Common Market. Earlier states had different rate of tax on different goods which has made way for tax evasion and geographical incentives has further concentrated trade and industry at such places. Uniform Tax rates across the states has invited the FDI and other investments in India.

3) GST Registration: The GST law has been drafted in such a way that it’s difficult to run an entity without getting GST Registration. The low basic exemption limit for registration, compulsory registration requirement for attracting reverse charge liability, mandate to register to pass on GST tax etc. has enhance the Tax base to a great number. As against approx. 64 lacs registered dealer in earlier indirect tax law the registration under GST has gone upto approx. 112 lacs in a span of one year.

4) Revenue Collection – India’s monthly goods and services tax (GST) collections crossing Rs 1 lakh crore indicates that the indirect tax regime is stabilising and that economic revival is too picking up pace. Further with anti-evasion measures like e way bill, credit matching mechanism etc. in place the collection is going to be robust ahead.

5) Input Tax Credit – The Seamless input tax credit is the backbone of GST. The GST implementation has paved the way for claiming Input Tax Credit of goods and services without any discrimination. Though the highest GST rate is as high as 28% excluding Cess the eligibility of Input Tax Credit has not resulted into much hike in the prices of goods and services thereby not resulting into inflationary pressure on the economy.

While the GST implementation has been successful on most front in achieving its objectives there were few loose ends in the process that has given a painful experience to the stakeholders.

Pains of GST:

1) Deficiency in Law: Multiple tax rates, varied interpretation in levy of Dual GST or IGST, negative list of ITC etc. has not been seen in good light by taxpayers. The inclusion of Petroleum, Electricity and stamp duty in GST needs to be completed this year which would remove the impact of cascading to some more extent and make goods and services from India competitive.

2) Single Point Implementation: The govt. has attempted to implement GST in toto from the 1st day itself however many provisions like Reverse Charge Mechanism, Time of Supply etc. being new concepts made taxpayer take more time to implement and understand its implication. This was realised a bit later by the Govt. till then the chaos and damage has already happened. Thereafter major provisions like TDS/TCS. Reverse Charge, Time of Supply of Services were deferred till 30/09/2018.

3) GSTN Teething Issues: The unprepared GSTN has given a lot of pain to the practitioners’ and the business community at large. The departure from the regular filing of GSTR1, 2, 3 to introduction of GSTR 3B has made the filing system very tedious. The filing of Transitional forms, registration module, and head wise payment system has made GST compliance very difficult. Late fees levy has further added to the woes.

4) E way Bill: Introduction of e way bill mechanism to have a check on movement of goods has not been seen as an ease of doing business. The limit of Rs. 50,000/- being a very small limit and requirement to prepare e way bill for all movement irrespective of any distance has not been hailed well by the trade and industry. Further, different states having different e way bill provisions has defeated the purpose of one nation one tax.

5) GST Refunds: The Refund mechanism for exporters, including data matching law, besides procedure governing them, have irked the sector, particularly smaller entities that saw their working capital requirement rise. Though several efforts have been made to address the issue, it may require more intervention.

Way ahead for betterment of GST:

Though GST has made vast progress from its early days of teething troubles the businesses are expecting a simpler tax filing regime, fewer slabs and a broader tax base to be addressed.

1) Expansion of Tax Base: GST has already bought many dealers under the tax net however with petroleum products, electricity, and alcoholic liquor still out of GST many dealers are not in tax net. Further, it is reported that only 1% of registered dealers are contributing to 80% of tax collection and this anomaly needs to be addressed.

2) Tax Slab: As many as six tax slabs, different Composition rates, Cess etc. needs to be rationalised so as to have at most two tax slabs of 12% and 18%. Multiple tax slabs result into tax evasion.

3) Unified Advance Ruling: In the recent past it has been seen that the Advance Authority constituted under GST are state wise and not centrally unified. These state wise authorities are issuing the Advance Ruling which are a bit arbitrary and at times contrasting to each other. A Central Advance Authority needs to be mulled so that Advance Ruling issued are uniform across the Country.

4) Return Simplification: The biggest agenda on the cards would be simplification of GST Return filing. The Past one year has been a nightmare for the GST Practitioner with GSTN teething issues, filing of monthly returns, matching of tax credit etc. The govt. is already working on it to consolidate and has to soon come out with a new methodology for GST Return filing.

5) Tax Payment: It has been suggested many times that instead of accepting payment in different heads and nomenclature the GST Portal should collect tax only in a single head just like PLA from where the dealer can apportion according to the need and liability. This will be a big step towards making GST Simple and user friendly.

Undoubtedly GST has supported to a large extend in formalising the economy and simplifying the indirect tax regime but a lot has to be done as it is an evolving tax legislation. The Central & the states deserve appreciation for coming together and working jointly under the aegis of GST Council which has delivered timely and implementing GST law in a federal state like ours has become a role model for other countries to follow.

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June 2021