Two years of GST: Steady equilibrium in sight amid stable revenue growth, but procedural irritants remain a worry

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GST promised to overhaul India’s indirect tax system by consolidating an untidy patchwork of local and central duties such as VAT, central excise and octroi into a single levy, make the tax administration more efficient and turn India into a common national market by removing fiscal barriers among states.

Two years after goods and services tax (GST) was launched in a grand midnight event in Parliament on July 1, 2017, its impact on businesses continue to play out over months in an economy characterised by multiple pain points.

GST promised to overhaul India’s indirect tax system by consolidating an untidy patchwork of local and central duties such as VAT, central excise and octroi into a single levy, make the tax administration more efficient and turn India into a common national market by removing fiscal barriers among states.

Two years later, it remains a work in progress, amid hopes that it is rapidly moving towards a steady state, aided by rationalised rates, improved tax collections, smoother procedures, and speedier refunds  backed by a more efficient tech backbone.

Tax collections have crossed the Rs 1 lakh crore mark for three months in a row, despite repeated rate cuts, mirroring greater compliance as more businesses in India’s bustling unorganised landscape join the new tax system, which was billed as the biggest structural reforms to be undertaken in independent India.

Data from the Controller General of Accounts put Centre’s GST collections at Rs 5.8 lakh crore for 2018-19. The Centre’s GST collections for 2019-20 has been pegged at Rs 7.6 lakh crore in the Interim Budget presented on February 1, a 30 percent growth over 2018-19, which some experts feel may be a tall ask.

About 3.4 million more tax payers have been added to India’s indirect tax base, a growth of 50 percent compared to the earlier system—a sign of declining tax evasion as transactions across and good’s supply chain get captured through multiple process.

Former Finance Minister Arun Jaitley on July 1 said GST has been both consumer and assessee friendly.

The “One Nation One Tax” system, has widened the assessee base from 65 lakh to 1.20 crore and steadily widened the revenue base, Jaitley said in a blog titled “Two Years After GST”.

“In the eight months of 2017-18 (July to March), the average revenue collected per month was Rs.89,700 crore per month. In the next year (2018-19), the monthly average has increased by about 10 percent to Rs.97,100 crore,” wrote Jaitley.

In its last meeting, the GST Council, headed by Union Finance Minister Nirmala Sitharaman extended the National Anti-profiteering Authority’s (NAA) term by two years, as authorities clamp down on tax dodgers through a system of investigation and penalties.

The return filing process remains a major irritant that continues to challenge businesses. The last date of filing annual returns — GSTR9 — has been postponed yet again till August 31, as businesses struggle on reconciliation between GSTR-1, GSTR-3B (forms filed currently) and how to manage the differences.

“The reporting of certain items do not have a place in GSTR-9 while the transactions have occurred during the FY 2017-18. The need to reconcile data between the GST returns such as GSTR-2A and books of accounts, between GSTR-1 with GSTR-3B is not just required at the time of filing annual returns. But is necessary on a regular basis before filing the periodic returns, to avoid losing any tax credits,” said Archit Gupta, Founder & CEO ClearTax.

In the first year, GST also turned out to be the economy’s biggest disruptor, with criticism pouring over the hasty implementation, hurting especially the small businesses.

Protests over relatively high rates on certain daily-use commodities forced the government to announce tax cuts on close to 300 items within just four months of its implementation, to soothe small traders hit by GST-related disruptions. Currently, only 27 items remain in the highest tax slab of 28 percent.

The third year may witness an addition of more items under its GST. Currently, alcohol, real estate, and petroleum products such as natural gas, aviation turbine fuel (ATF), crude oil, petrol, diesel among others are taxed in accordance with the pre-GST tax regime, till the highest decision-making panel in the new taxation system—the GST Council— chooses to include them.

Discussions regarding the inclusion of natural gas and ATF under GST have already begun. Under the existing structure, the fuels attract the Centre’s excise duty and a state’s value-added tax. Both these and all other levies will get subsumed under GST if they were brought under its ambit.

There is also a scope for reducing the number of items from the 28 percent tax slab, but it will completely depend on the revenue position of the Centre and the states.

Industry experts have been pitching for two-three GST rates for general and demerit goods, a position that the GST Council may start discussion on during the coming months.

Source : https://www.moneycontrol.com/news/business/economy/two-years-of-gst-steady-equilibrium-in-sight-amid-stable-revenue-growth-but-procedural-irritants-remain-a-worry-4155921.html

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