Almost one year back, at the stroke of the midnight hour, India ushered in a new era and awoke to a ‘one country one tax’ regime. The introduction of the Goods and Services Tax (GST) on July 1, 2017 has been not only the biggest indirect tax reform, but also a landmark in the country’s taxation history. Last year has seen a remarkable journey of an entire nation’s bureaucratic and executive machinery working in overdrive to ensure successful GST implementation.
As far as the common man is concerned, though GST implementation faced transitional issues initially, it has stabilised now. However, last year has been somewhat challenging for industry. This was always expected, as it happens with every new law which impacts the length and breadth of the country.
The major challenge was in getting accustomed to the new laws and procedures, as also dealing with issues relating to compliance through the technological arm of GST which is the GST Network (GSTN). Amidst all this, the most commendable aspect has been the proactive and consultative way in which the government took corrective measures, be it administrative simplification or changes in the rates, to ensure smooth implementation of GST.
As we enter the second year of GST, the initial teething troubles may have been resolved, but a lot more needs to be done to achieve the main objective of GST being the keystone simplification exercise of the indirect taxation system.
GST Council and the government need to take the good work forward by ensuring a simplified and transparent administration along with rationalisation of rates to make them reasonable, by including most items so that the tax base is expanded and yield from the tax reform is maximised.
The return filing process needs to be made simpler. Not only will this increase compliance and widen the tax base, equally importantly it will facilitate ease of doing business. The current return filing process under GST is somewhat cumbersome and time consuming for the industry.
It has to be applauded that the GST Council has recognised the hardships faced by taxpayers and has proposed a simple new return design. The experience of challenges encountered should be a learning for the future and the government must endeavour to ensure that the same problems are not faced by industry under the new return filing process.
The moot point here is that before the new return filing system is actually implemented, it should be fully tested, and finalised after due consultation with the stakeholders by putting in the proposed return form in public domain. Most importantly, implementation of the new process should be started after extensive training to the stakeholders and due industry preparedness.
A recent press release issued by the government states that GST has resulted in formalisation of the economy and would augment not only indirect tax collections but also direct tax collections, due to seamless flow of data to the Centre and states. Further, a trend of increase in revenue collections under the GST regime has been observed, as per information placed by the government in public domain, from time to time.
The increasing revenue collections are also majorly attributed to implementation of anti-evasion measures, including the electronic way bill system. Thus, apprehensions regarding revenue loss to states seem to be fading away and now concrete efforts are required to bring excluded sectors within the GST net.
Undoubtedly, GST is still a work in progress, till the time all sectors of the economy are brought within the ambit of the new national indirect tax regime. To make the GST reform truly effective and to really make it ‘one country one tax’, both central and state governments must recognise the need of eventually bringing the excluded sectors like petroleum and real estate within the ambit of GST.
The next step would be to consider converging the existing band of GST rates to three, in line with international standards. This will help to resolve interpretation issues regarding classification of goods and consequently reduce complexity and probability of disputes, eventually leading to simplification.
With implementation of GST in the country, the mechanism of Advance Ruling has also been provided under the GST laws to achieve the objective of providing a binding ruling on important issues so that intending investors will have a clear-cut indication of their liability in advance. However, divergent rulings by different revenue officers in different states have created an environment of uncertainty and chaos amongst the taxpayers.
The government should, therefore, constitute an independent high level central body (similar to the one under the erstwhile indirect tax regime headed by a retired judge of the Supreme Court) as ‘Authority of Advance Ruling’ under the GST regime.
Going ahead, implementation of these measures would certainly lead to achievement of intended objectives from introduction of GST – namely uniformity in taxes, simplification, ease of doing business and reduced litigation. The government and industry must come and work together to move to ‘successful GST’ from ‘successful implementation of GST’. This will be a key axis in India’s journey towards becoming a developed country in the future.