The goods and services tax (GST) has completed two years of operation. Hailed as the single-biggest tax reform, the GST was rolled out with a gong in a special session of Parliament two years ago and subsumed 17 existing indirect taxes including the excise duty and sales tax.
GST is currently levied on every product except petroleum, alcohol, tobacco and stamp duty on real estate in four slabs of 5, 12, 18 and 28 per cent. Most of the daily use articles have zero GST as per the latest revision of the tax rates last year.
In December last year, former Union Finance Minister Arun Jaitley said 97.5 per cent articles covered by 18 per cent or lower GST slab. Under the previous, value-added tax (VAT) regime, standard taxation rate was much higher. Standard VAT rate was 14.5 per cent and excise duty was 12.5 per cent. This was to be topped up by sales tax and cess. In many cases the overall tax rate crossed 31 per cent.
In his latest blog, Jaitley said only luxury and sin goods are now taxed at highest 28 per cent GST rate. Reduction in tax incidence has been the biggest accomplishment of the GST for the people. For traders, the system of input credit has been a significant provision as it helped them to pass on lower tax to the customers and also reduce overall costing.
In the pre-GST period, traders had to comply with the rules and regulations of various tax departments and laws. Now, tax compliance has been easier for traders. This has augured well for the government as the revenue base has expanded exponentially.
The assessee base under GST has increased by about 85 per cent in the past two years. On the eve of the GST rollout, the assessee number stood at around 65 lakh, which has gone up to 1.20 crore now.
The government’s revenue collection has also gone up. The average revenue collection per month in the eight months of 2017-18 was Rs 89,700 crore per month. This propelled the annual revenue collection by about 12 per cent.
The monthly average revenue collection increased further in 2018-19 by about 10 per cent to Rs 97,100 crore. But despite this accomplishment, the revenue collection missed the target that the government had set for the GST for both the years since its rollout.
In 2018-19 Budget, the GST collection was estimated at Rs 7.4 lakh crore which was revised later in 2019-20 interim budget to Rs 6.4 lakh crore. But the finance ministry’s figures show that the actual GST collection for 2018-19 was around Rs 5.8 lakh crore, a significant shortfall of over 20 per cent compared to budget projection.
Interim budget projected GST collection for 2019-20 at Rs 7.6 lakh crore. But there is a dampener to this estimate as well. The average GST collection for April and May this year was over 10 per cent lower than the corresponding figures for 2018.
Another major drawback of the GST has been multitude of tax rates, which negate the basic idea of having less cumbersome taxation. The International Monetary Fund (IMF) had last year advised he government to simplify GST to smoothen the processes of business and finance.
Multiple GST rates and complaints about troubles with the GST Network in filing returns had prompted Congress president Rahul Gandhi to dub the new tax regime as Gabbar Singh Tax after the villain of blockbuster Hindi film Sholay.
However, the government is confident that GST’s future is bright. In his joint address to Parliament, President Ram Nath Kovind said the government will simplify the GST in this fiscal year. “Exemption to persons earning up to Rs 5 lakh from payment of income tax is an important step in this direction,” he said.
Reducing the number of tax slabs is being talked about. There are suggestions that GST tax slabs – including zero rate — can be re-categorised into three. However, Jaitley has said a sudden reduction in categories will lead to massive loss of revenue for the government. He suggested a gradual reform in this direction.
GST is still a work in progress. It is evident from the 35 meetings of the GST Council that has made 90 amendments in the GST rules. The council is now rolling out a new GST return filing system that will enable traders to file returns in a single format once a month instead of multiple formats. It will be launched from October 1 this year.
The new tax regime is being received well as 20 states are independently showing more than a 14 per cent increase in their revenues. Compensation fund in their case is not necessary. Apprehension of loss of revenue for states due to GST was the major stumbling block in the rollout of the GST, which took birth on July 1, 2017 after 17 years of complicated gestation.
Source : https://www.indiatoday.in/india/story/2-years-of-gst-hits-misses-and-future-1559678-2019-07-01