Measures such as constant rationalisation of GST rates of goods and services, together with anti-profiteering norms and inverted duty rate corrections, have ensured that the benefit from GST is real, across the supply chain.
GST’s journey so far in India has been eventful. From its beginnings as a policy change implemented in a mad rush to meet constitutional deadlines, this tax reform has come a long way in terms of structural and procedural changes, battling multiple teething issues and technological roadblocks.
GST brought in the much required global alignment in indirect taxation structure, since the tax was already in place in several countries, by way of reduction in cascading of multitude taxes coupled with implementing a fully online ecosystem. There has been an increased focus on use of technology for driving the ‘ease of doing business’ agenda, by way of paperless compliances, e-filings, virtual hearings, maintenance of e-records etc. Moreover, much constant work has been directed towards upgrading the infrastructure by introducing linking of different platforms, auto-population of returns, etc. All technology-oriented measures have augmented transparency between the tax authorities and the taxpayers. Further, introduction of e-invoicing coupled with integrated waybill mechanism has further aided in keeping tax evasion in check, along with improving revenue collections over time.
Measures such as constant rationalisation of GST rates of goods and services, together with anti-profiteering norms and inverted duty rate corrections, have ensured that the benefit from GST is real, across the supply chain. Further, standardisation of rates across territories, ease in obtaining registration and liberal provisions for setting off tax credits, among other measures, have somewhat eased the supply chain woes of domestic as well as foreign players looking to set up businesses in the country. Constant efforts are being made for incentivising domestic manufacturing as compared to an import and sell model. This has been done by providing concessions/ exemptions on duties applicable on import of capital goods and/or raw materials essential to enable manufacturing in India.
The use of artificial intelligence and machine learning capabilities by the authorities has resulted in an increase in investigation activity over the past few years. Some areas which have been on the authorities’ radar recently, include refund claims in case of exports, denial of credit due to failure by supplier to deposit tax, dealings with offshore group entities (such as reimbursements for expenses), discrepancies between data reported in GSTR 1 vs GSTR 3B, etc. Going forward, the level of scrutiny could pick up pace with Revenue authorities gearing up to conduct GST audits. The scope of these audits could likely be more granular and expansive, compared to previous tax regimes, if recent investigations and the perpetual amendments in matching provisions are any indications.
The successes of GST notwithstanding, there have been some misses as well. Taxpayers have faced snags intermittently, while dealing with the online ecosystem, such as issues around filing returns during peak hours and errors in generating e-invoices. Even after four years, ambiguity still prevails over multiple aspects of the law, such as the scope of intermediary services, availability of refund for credit on capital goods and input services, treatment of post-sale discounts, etc. Lack of consensus amongst various state advance ruling authorities has only added to the uncertainty on litigious issues. Further, strict provisions around matching and blocking of tax credit, lack of an option to obtain centralised registration, instead of multiple state-based registrations, and the problems associated with transitioning credits from previous tax regimes, have been matters of concern for small and large taxpayers alike.
Besides the above aspects, foremost on the GST Council’s agenda should be to take up the long-pending demand of industry to bring petroleum products and electricity under GST. Doing so will help the country move towards the goal of ‘One Nation, One Tax’ which was touted as one of the biggest selling points of GST. Further, constitution of a National Appellate Authority for Advance Ruling (NAAAR) introduced vide Finance Act 2019, should help put to rest the uncertainty around issues that have been a subject of conflicting rulings by various state advance ruling authorities. With all the buzz around AI and Machine Learning, GST compliance and administration are expected to sustain move towards enhanced digital adoption and automation.
For all its persisting issues and challenges, most stakeholders will admit that GST has been quite successful in achieving the primary objectives of simplifying India’s indirect tax regime, eliminating tax cascading, and curbing tax evasion. Considering the large quantum of taxpayer data at the disposal of the authorities, it is crucial to watch how the action on the insights gathered from such data, pans out. One can only hope that a rational approach would be taken by authorities to continue fostering India as a taxpayer friendly destination for doing business.
( Sheena Sareen, Director, Deloitte Touche Tohmatsu India, LLP and Payal Tuli, Tax Principal, DTS Global Trade Advisory)