Many might be unaware, but the idea of implementing GST in India was introduced under the leadership of late Shri Atal Bihari Vajpayee. He appointed an Empowered Committee (EC) in the year 2000, and the committee was tasked with drafting the GST laws. The EC’s along with several others’ efforts finally came to fruition in the year 2017 with the adoption of the Good and Services Tax (GST) Act, 2017. Since July 1, 2017, GST has been in full operation and it seems to have restored order to the taxation system in India.
GST is basically an indirect tax replacing most of the indirect taxes that are levied during various stages of production of goods and services. In this way, GST becomes an indirect tax for the whole country. GST basically aims at removing the cascading effect of taxes. Cascading effect is basically the additions and accumulation of taxes at each level of production of a good/service.
The system of GST return and its compliance were a bit baffling and confusing to the taxpayers at first. This statement comes not from the writer’s perspective but straight from the mouth of the Principal Cheif Minister of Central Taxes Mr. AK Jyotishi. He says “We do accept the fact that GST initially had several glitches and had created complexity in complying with it.” Now, the government claims to have straightened out the flaws and glitches with the statement from Jyotishi, adding, “a sizable chunk of the hitches stands removed.”
The government has gone as far as to say that there has been a voluntary compliance and great response to GST after its initial stages, leading to a rise in the tax base from 60 lakh crores to 1.10 crore crore rupees. This sounds great for the government but only on paper. The tax base increase can be accredited to the inclusion of many sectors in GST that had been previously excluded. GST integration and application has surely helped taxpayers with filing their taxes and smoother compliance.
Present numbers, however, paint a picture of grim reality and realization for the government. The government had offered to provide compensation for 5 years because of the losses incurred by state governments due to the implementation of GST – a good move by the central government helping state governments consolidate the law till the grass root levels.
However, recent realizations and evaluations have left the central government dissatisfied with the low revenue figures of the GST regime. The bi-monthly compensation for the months of June and July 2018 rose to as much as 3.8 times that of the months of March and April 2018. The central government is also constantly falling short of their set target of 1 lakh crore. The government, however, presents a strong front and claims that they have eliminated implementation errors and are also “better equipped to deal with defaulters”, which sounds like a hollow statement considering current events. In this regard, the central government is formulating strategies and hoping state governments will help identify flaws within the current system.
The PTI (Press Trust of India) was also told by a high-ranking official that the government needs to devise a strategy to shore up GST revenue. The source also bemoans at a lack of a set pattern for paying the compensation to individual states.
The government, however, isn’t just sitting quietly and watching as they are failing to gather appropriate revenue – GST is set to undergo radical changes in the coming times.
Here are some of the reforms the government is planning to implement:
Thus, in conclusion, the GST Act has been a welcome change to the taxation regulations in India. However, even after getting past the confusion and challenges of implementation, the government is yet to get a firm grip on the tax-structure of GST and like with any other radical change, GST has to be steered to success with gentle care.