Clipped from: https://www.thehindubusinessline.com/opinion/editorial/gst-8/article69755972.ece
The tax has helped ease doing business, but glitches remain
The Goods and Services Tax has come a long way since its inception in 2017 | Photo Credit: iStockphoto
The implementation of GST, as it enters its ninth year today, can be counted as one of the big reform successes in recent times. The flow of input tax credit (ITC) across the board and the removal of a clutter of State-specific levies has smoothened business operations, particularly the movement of goods across States. Amidst the clamour for reducing the number of slabs to three, it should not be forgotten that there are just four basic slabs (leaving out bullion and jewellery), something that could scarcely have been imagined at the turn of the century when GST came into being as a concept.
This simplification has translated into a 33 per cent improvement in transport time, an increase in number of commercial taxpayers from 60 lakh to 1.5 crore and an average monthly collection that is close to ₹2 lakh crore. E-invoicing and e-way bills have had a transformative impact. In an interview to this newspaper, Finance Minister Nirmala Sitharaman said that work was in progress to bring down rates wherever possible and that a reduction in number of slabs was under consideration. The highest slab of 28 per cent could become the default rate for ‘sin’ goods after compensation cess is phased out. A shift from 18 per cent slab (which applies to some goods and all services) to 15 per cent may be worthwhile. Given the time taken to receive ITC, any reduction in rates will improve cash flows and reduce the tax burden on the producer at the start of the chain.
However, GST, conceived as the ‘good and simple tax’, is not free of complications. Over time, it has run up over 8,000 disputes, whereas the process of setting up appellate tribunal has just kicked off, with the GST Appellate Tribunal (Procedure) Rules, 2025, coming into effect in April. The High Courts are too burdened to handle these disputes, most of which would pertain to procedure or method rather than the law itself. Businesses are perturbed by aggressive, revenue-driven assessments made by State tax authorities in particular. Punitive provisions in the GST law need to be revisited. It is also important for GST authorities not to lose sight of the broader goals of simplification and inclusion when they issue directives from time to time. A case in point is the reversal of the Supreme Court ruling in the Safari Retreats case, a move which may effectively push players in the construction sector out of the GST network and have an adverse revenue effect.
Small industries face difficulties in coping with GST, despite government efforts to address their problems. The reverse charge mechanism, where the recipient pays tax for the supply, could put them at a disadvantage. The mismatch between monthly filing requirements for large units and quarterly norms for smaller ones may impact ITC recoveries of the former and nudge them to look for other suppliers. That said, GST has delivered gains to all stakeholders (bonafide producers, traders, consumers and government). The system needs to be toned up for better results.
Published on June 30, 2025
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