With the first anniversary of the landmark reform, GST, it is worthwhile to see what worked in favor of the government and India, and what is needed to make it ‘a real success’ for the economy.
The Goods and Services Tax (GST) regime is scheduled to complete a year on July 1, 2018. GST collection for the month of April reached Rs. 1,03,458 crore. On July 1, 2017, history was created when the country witnessed the biggest and most important economic reform since Independence—the goods and services tax (GST). The reform that took more than a decade of intense debate was finally implemented subsuming almost all indirect taxes at the Central and state levels.
The GST, termed as ‘one nation, one tax’ by the NDA Government led by PM Narendra Modi, aims to provide a simplified, single tax regime in line with the tax framework applicable across the globe. The GST provides a four-tier rate structure for goods and services, which is based on the principle of ‘equivalence’ and aims to ensure that different economic classes are not subject to tax at the same rate.
THE CAPITAL POST analyzing what did not go so well and what all is awaited to make the GST ‘a real success’.
WHAT WORKED
The GST has certainly reduced multiplicity of taxes and has thus created a simplified tax regime to promote ease of doing business. From a macroeconomic perspective, the government and industry expected the GST would be instrumental in reducing economic distortions, which in turn, would provide necessary impetus to economic growth.
THE ECONOMIC SURVEY
India’s GDP Growth
2016-17
7.1% (this decline was expected to be temporary)
2017-18
6.5%–6.75%
2018-19
7% to 7.5% (expected)
The Index of Industrial Production (IIP)
2017–2018
5% Growth
2016–2017
3.9% Growth
Revenue Collections
April 2018
Above Rs.1 lakh crore
Companies Registered
2017–2018
68,299
2016-2017
63,106
The GST has revamped the way business was done till its implementation. Many companies used this opportunity to create value for their businesses across procurement, manufacturing, distribution, and logistics.
THE CHALLENGES
Undoubtedly, periodic compliance required under the GST regime presented its share of challenges. In this period, compliance-related experiences with the GST haven’t been smooth and the government had a daunting task of updating various functionalities ever since the GST portal was made operational in July 2017.
Industry expected a simplified compliance mechanism, but contrary to expectations, it experienced significant issues with the GSTN (GST Network) system.
ISSUES WITH GSTN
Taxpayers experienced typical problems.
Difficulty in accessing the GSTN system
Slow response rate of the system
Error resolution mechanism
Absence of any functionality to rectify inadvertent errors in the returns
SOME ISSUES STILL REMAIN TO BE RECTIFIED
Slow response rate
Errors faced around due dates for filing of returns
The E-Way Bill System (Feb 2018)
Anti-profiteering provisions has its own challenges
MODI GOV. ADVOCATES 5 KEY BENEFITS
Ease of doing business
Decrease in inflation
Decrease in black transactions
Boost to Make in India
More informed customers
MERCHANTS FEAR IN ONE YEAR
Let us know whether the traders of various cities in the country feel they have been benefited from GST or their problems have increased due to its implementation.
Gujarat: Unsatisfied
Mumbai: Unsatisfied
Jaipur: Unsatisfied
Delhi: Mixed
Lucknow: Unsatisfied
Kolkata: Mixed
Ujjain: Satisfied
Noida: Satisfied
Meerut: Unsatisfied
Varanasi: Mixed
Rajkot: Mixed
Jodhpur: Satisfied
Indore: Satisfied
STARIGHT FROM THE “GADDI”
“This unprecedented taxation growth is a result of a number of measures adopted by the government including – the anti-black money measures, use of technology, demonetization and the GST. Most of these measures were severely criticized by the Congress Party”–Arun Jaitley
“P. Chidambaram ✔@PChidambaram_IN Point 1. The RBI’s Consumer Confidence Survey (May 2018) found that 48 per cent of those surveyed felt that economic conditions had worsened in the last 12 months”–P. CHIDAMBARAM
“Now that the Lok Sabha elections are near, the government is taking such a stance so that it can get its benefits in the 2019 elections. This is an insult to the soldiers of the army, who, by their own lives, fight on borders against enemies. The BSP chief said after so much time, the motivation behind showing the video of a surgical strike was to wander people’s attention with issues like demonetization and GST”-BSP SUPREMO MAYAWATI
MOST INTRICATE IN WORLD
The World Bank had also earlier stated that India’s Goods and Services Tax (GST) system is one of the most complex tax systems in the world. It not only involves the highest tax rate, but also has the highest tax slabs in this system. The World Bank has said that India is second in the world in the high standard GST rate, first in Asia, and second in the world after Chile.
“The tax rate in the Indian GST system is highest in the world. The highest GST rate is 28 percent in India. This is the second highest rate in 115 countries, where the GST (VAT) system is applicable. What makes the GST system complicated is the number of different GST rates applied to different categories of goods and services”–World Bank
FUELS UNDER GST?
Centre’s plan to come up with a new GSTR form starting 1 January, 2019 and the Finance Ministry is also looking to launch a pilot for the same in October this year, as suggested by Hasmukh Adhia, Finance Secretary.
The secretary also said natural gas and jet fuel (ATF) are ‘natural’ and ‘easier’ candidates for inclusion in the indirect tax regime and the call for including the two in GST would be taken up the regime’s highest decision making body GST Council.
It, however, is unclear whether it would be on the agenda for the next GST Council meeting on 21 July or not.
“Everybody knows the figure for the amount of tax we collect, if that is say one lakh crore, the amount of tax liability that is generated every month is five lakh crore. Four lakh crore is input credit claimed”–Hasmukh Adhia, Finance Secretary
“The Centre is coming up with a mechanism to fill the gaps through use of IT to match invoices and identify wrong claims. “There may be a case of 10 percent wrong input credit claim. That will boost our revenue by 40,000 crore”– Hasmukh Adhia
CURRENT SYSTEM WAS TO CONTINUE TILL JUNE
The current system of payment of goods and services tax (GST) returns for industry and business was announced to continue till June this year. GST Council had also increased the existing GSTR-3B system for three months to register returns in its meeting back in March. Finance Minister Arun Jaitley said that electronic bill for the movement of goods from one state to another would be implemented from April 1.
RECORDS IN JANUARY
Goods and Services Tax (GST) collection declined marginally to Rs 86,318 crore in January 2018. In December 2017, the GST collection was Rs 86,703 crore.
“According to the data received till February 25, total GST collection in January was 86,318 crores. In December the total GST collection was raised. This has reduced the GST collection in the last two months in November and October”–Finance Ministry
WHAT LIES AHEAD
The past year has shown that a semi-complete technical process (GSTR-1 but no GSTR-2 – for example), creates not just problems for the Government, but also the taxpayer – since there is no simple way to complete compliance. It leads to confusions of information, conflicts of information, and increases suspicion and mistrust. It penalizes the honest and rewards the dishonest.
The past year has also shown, that being a technology-first tax system, it is far easier to detect the anomalies early rather than late, and therefore, is a strong pointer to the benefits of ‘simplification with completeness’.
All the decisions have been taken for what can be called GST 2.0. What we await is the announcements for its actualization. What we await, is the realization of the core promises of GST. What we await, is the economic acceleration that it is capable of.