The Goods & Services Tax (GST) regime, which was launched at the stroke of midnight on June 30, has completed a year of implementation and a lot still remains to be done.
Before this remarkable launch, India’s most touted tax reform was incipient for 17 years and yet the beginning of the journey was a rough one.
Several sections of trade ran up for strikes and protests in the initial months. To address the woes of businesses, the apex decision making body on GST — the GST Council — met 27 times in the past one year and took several decisions.
Decisions such as increasing the threshold limit for composition scheme for traders, manufacturers and restaurants from Rs 50 lakh to Rs 1.5 crore helped in expanding the tax payer base from half- million to one million.
A rate slash came as a Diwali bonus when taxes were reduced in 178 items from 28 per cent to 18 per cent.
Businesses also suffered from high compliance costs from reverse charge mechanism, under which registered dealers are required to make tax payments in case they procured goods or services from unregistered businesses. Businesses were frenzied to determine the right classification of goods or services which were supplied by unregistered businesses and pay the tax at suitable rates. Finally, the GST Council exempted reverse charge mechanism on such procurements which is now further extended till September 30 of this year.
While a lot seems to have been done in the debut year, there is a lot to do even now.
Congratulating the people of India on GST’s first anniversary, Prime Minister Narendra Modi said milk and Mercedes cannot be in the same tax slab. But the current 5-tax slab system for GST in India is quite complex.
The government also has to simplify the return filing process which remains burdensome even after temporary suspension of the GSTR 2 and GSTR 3 forms. The online GST portal should stabilise and align with the legislation. The government also needs to take some measures for refund of tax credit to the exporters.
The GST was aimed to reduce the cascading burden of tax, which it did by subsuming multiple levies. However, exclusion of essential items from GST such as electricity, petrol, diesel and real-estate has led to issues related to input tax credit.
As the nation celebrates GST anniversary, we hope the government will take measures with the same fervor and keenness as it did in the maiden year to make GST a “Good and Simple Tax”.
The authors are CA with IncoFirm