The new tax regime, which was billed as the biggest taxation reform since Independence, had promised to remove tax on tax but it still remains as compensation cess. However, subsumption of 17 taxes into GST has led to greater formalisation.
The shake-up in India’s taxation system with the Goods and Sales Tax (GST) has shown not only the inherent strength of the official machinery but also the resilience of trade, industry and consumers in adopting to an altogether new paradigm.
It required a huge amount of political courage on the part of the government, and Prime Minister Narendra Modi showed enough of it to implement the most important tax reform in the country after independence. There were naysayers in plenty, but Mr Modi put at stake the political capital and bit the bullet. Surely, taxpayers and tax callectors have had a mixed experience. The initial stages were more difficult as confusion had arisen on various counts — the IT backbone, filing of returns, complexities in rates and the methodologies of fixation.
Then, the system had to be sensitised about new concepts such as the input tax credit, e-way bills, anti-profiteering etc. Big corporates could engage lawyers and chartered accountants to work their way out, the problem was more pronounced for the trading community, small manufacturers and small contractors.
Besides, the consumer had to be educated and sensitised, as the larger part of the economy was getting formalised.
Formalisation of the economy through GST should not be seen from the prism of only a punitive measure whereby willy-nilly you have to be part of the taxation net. One of the major pull factors for the tax net was the input tax credit, but the bigger trigger was capturing of the data in a seamless manner.
Somehow, a message went around that through this indirect tax system, data relating to direct taxes was also being captured and the end result was a big jump in the number of people filing their income-tax returns. The number of people filing their I-T returns has gone up from 5.43 crore in the FY17 to 6.84 crore in FY18.
While it may be true, it would also be jumping to a conclusion if the rise in the number of people filing I-T returns is attributed to GST. The secular trend shows that year on year, this number increases. Surely, the GST could have been one of the reasons.
The fact that about 17 different taxes were subsumed into a single tax also led to greater formalisation of the economy. The GST also aggregated the taxes into a solid database, driven by a smart technology backbone. The taxes of Central excise, the state sales tax or VAT, octroi etc were being implemented with or without unified data aggregation. Now that all merges into a single data pool and tracking of the stakeholders — from big corporates to small traders — would be well-synchronised.
Well beyond the taxation oversight, the GST data aggregation and the kind of analytics emerging from the same have immense possibilities of improving the way we run our economy. For instance, the entire consumption pattern, raw material usage, supply chain and logistics are now available in a solid data format which can be used for productive purposes.
While the way forward is being suggested by several experts, the GST Council should be complimented for ironing out some of the contentious issues like jurisdiction or dealing with different cesses, without really getting bogged down by any political considerations, some skirmishes here and there notwithstanding. In conclusion, the GST’s year-long jouney has seen both bumps and smoothening of the ride. Going foward, it promises to yield far better results in terms of revenue realisation as also the tax-payers’ experience.
Still a long way to go for smooth rollout
26% widening of the taxpayer base in FY18 was seen, according to the data available in public.
18% rise in direct tax collection was also noted over FY17.
- In May, GST Council decided on a new format in which only one return will have to be filed in a month.
- Even GST Network was decided by Centre to be converted into a 100 per cent government-owned company.
- GST rates have been rationalised multiple times. Many rates were slashed after the government realised that it had wrongly calculated higher taxes on these items.
- Lack of clarity in GST law as to the applicability of provisions and complex return filing procedures were the major problems.
- The controversial provisions of the liability to pay tax on reverse charge basis has been deferred till June 30. The provisions for tax deducted and collected at source also remain suspended till June 30.
- While the government has set up an anti-profiteering body to ensure that companies pass on low costs to end user, the absence of guidelines make companies worry.
- The anomalies in GST has affected exporters greatly. In order to encourage exports, the government has been refunding taxes paid on exported products to exporters. However, after the rollout of GST, the duty refund processes witnessed inordinate delay.
- Calling the GST regime more “primitive” than the VAT, West Bengal finance minister Amit Mitra has recently said that the Centre is using ledger for manual record of refunds due to lack of interface between the GSTN and customs electronic date interchange as well as the DGFT.
- Experts feel that difficulties being faced by people and companies are due to the complexity of the fiscal system and argue that it’s not yet the time to write an obituary for the tax reform.
