The taxpayers’ experience in the last four years have been mixed, with the organised and large industry players having easily adapted to the new GST world while the small and medium businesses are yet grappling to adapt to the tech-enabled regime.
As Goods & Services Tax completes four years of its implementation, the words of our former Finance Minister, Arun Jaitley, in the Parliament’s Central Hall on the midnight of 30 June 2017 still reverberates afresh in our ears “The goods and service tax may be a destination tax, but for India it will begin an altogether new journey…”. Indeed, for India, a completely new journey commenced on July 1, 2017 with goods and services tax, being touted as one of the biggest economic reforms of independent India, which setsailin the country after a decade of deliberations. The voyage of four years has been a roller-coaster ride for all stakeholders with equitable share of hits, misses and expectations.
Besides removing the cascading effect of taxation, one of the biggest hits in the journey of GST has been the pursuit towards achieving an automated indirect tax ecosystem. From electronic compliances, generation of e-invoices to tracking movement of goods through e-waybill, everything is sought to be run online. E-invoicing system is not only aimed at weeding out the rampant menace of fake invoicing, but would also usher the taxpayers into a fully automated compliance regime wherein the computation of tax liabilities and matching of input tax credit would become very simple. This is no mean feat and not many countries in the world have attempted or been able to achieve the implementation of such a large scale and complex digital tax transformation project. India has served as an example to the world by successfully implementing one of the most complex tax transformation projects for the country.
Despite the initial teething issues at the time of GST implementation, it has been encouraging to see the stark improvements in the IT framework under GST law. Simplification of compliance activities by undertaking various initiatives viz. linking the customs portal with GST portal for credit availment on imports, making available proper means for matching input tax credit, increased automation of the refund procedure to seamless operation of the Invoice Registry Portal, there has been a drastic change, overall.
Another defining feature of the GST regime was the constitution of the GST Council and ensuring Centre-State partnership in the decision-making process. Though there have been some frictions off-late creating intermittent blips in the success of this structure, as of now, the spirit of cooperative federalism has largely stayed afloat and has enabled the GST Council to proactively make corrections to law, issue clarifications on complex issues, rationalize GST rates and introduce relaxations for dealing with the Covid-19 pandemic, which fact establishes that the GST Council structure has been very functional and agile.
No transformation of the scale and complexity can be achieved without its share of hiccups and challenges. Despite the aforesaid hits, the positives of the GST regime have been marred by several obstacles ranging from technical glitches to legal loopholes, which was not unexpected given the scale and complexity of the transformational change with GST.
The statute has undergone innumerable tinkering in the past four years, some of which may have left the stakeholders in a state of confusion and dismay while others have brought in much needed relief and clarity. Afterall, every transformational journey goes through a process of evolution and in that context, GST is still in its nascent phase.
The taxpayers’ experience in the last four years have been mixed, with the organised and large industry players having easily adapted to the new GST world while the small and medium businesses are yet grappling to adapt to the tech-enabled regime. The fundamental principles on which the GST law was built viz. seamless flow of input credits and ease of compliance has been impaired by IT glitches, difficulty in input tax matching and introduction of a few draconian provisions in law. The benefits of GST have been eclipsed by the frequent issues faced by businesses. Further, the 15th Finance Commission, in its report, has also highlighted several areas of concern in the GST regime relating to multiplicity of tax rates, shortfall in GST collections vis-à-vis the forecast, high volatility in GST collections, inconsistency in filing of returns, dependence of States on the compensation from Centre and so on.
While the situation has been further impacted due to the pandemic-led economic contraction, it is imperative to say that certain structural level changes to the law may help boost the business and economy.
For instance, with oil prices sky-rocketing across the country, the policymakers need to contemplate the inclusion of petroleum and related products within the GST net. Further, with a flood of litigations pending to be decided and huge amounts of refund claims being disputed, it is vital to finally constitute the GST Appellate Tribunal as it is obvious that all taxpayers do not have the finances or means to approach the High Court for every practical difficulty faced. Additionally, streamlining of anti-profiteering measures and simplification of compliance procedures also needs to be revisited to ensure that the cost efficiency and reduction in prices envisaged under GST law finally reaches the common man.
If one were to take the opinion of the stakeholders on the success of the GST regime, the answer would normally swing between two extremes. However, it has to be conceded that the answer to the question lies somewhere in the middle. Although it is important that the shortcomings be swiftly resolved, it needs to be understood that it takes time to reap benefits of such a mammoth structural change. The law is still a ‘work-in-progress’ and the process of evolution, in such a complex journey, cannot be eliminated. The new India is confident that the Government will continue to take measures to deliver on its promise of a ‘Good & Simple Tax’ in the times to come.
( The writer is Tax Partner, EY India)