Well begun, half done – Business Line

One year after the introduction of the epochal Goods and Services Tax (GST), it is only too easy to pounce on the glitches that have unfolded and jump to the conclusion that GST has brought more pain than good to the economy. Nothing could be further from the truth. The Economic Survey 2017-18 has computed that as of December 2017 “GST has increased the number of unique indirect taxpayers by more than 50 per cent – a substantial 3.4 million.” The growing formalisation of the economy is likely to lead to a substantial rise in tax collections once the GST Network stabilises, marking a break from ongoing trends. Besides, it will also bring a larger share of the workforce into the formal ambit. The Survey also contests the view that the GST system poses a huge headache for small businesses, pointing out that “54.3 per cent of those eligible to register under the composition scheme, chose instead to be regular filers”. In other words, 1.9 million small businesses chose to be in the GST net for the input tax credit benefit that the composition scheme (under which they pay a flat percentage of tax on their turnover) does not offer. Many of these units are buyers from larger firms. Besides, the big picture should not be forgotten amidst compliance troubles – namely, that businesses, large and small, stand to gain from a common tax set-up for goods and services; elimination of cascading levies; the standardisation of rates across States; and, hopefully with the passage of time, a leaner and less labyrinthine tax administration. It is also heartening that the GST Council has been responsive to criticisms on fitment of goods, and is inclined to shift items from the 28 per cent slab to the 18 per cent category. A reduction in services rates from 18 per cent should be on the agenda as well.

However, delays in input tax credit (ITC) payments, owing to GSTN glitches, are a concern. Invoice ‘matching’ on the portal through the forms GSTR 1 and 2 flopped miserably, leading to businesses filing GSTR 1 (their monthly sales) and GSTR 3B (their self-declared monthly tax return). However, this has led to the tax authorities turning suspicious and not releasing input credit. The decision to shift to a single monthly return later this year, with ‘offline’ verification of invoices, should help. Exporters continue to be hit by compliance issues and delayed reimbursements of IGST and input tax credit. Unregistered and composition scheme units are cannot easily do inter-State transactions. While these concerns are addressed, it should be borne in mind that a return to tax heavy handedness would be profoundly ironic for a measure that was meant to clear the all clutter.

Revenue collections under GST have picked up despite these snafus, on account of the growing tax base. However, the gross collections of ₹1 trillion a month do not tell us much in the absence of information on ITC backflows. GST is a long-term structural reform measure. Results would take time in coming.

via Well begun, half done – Business Line

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