GST Completes a Landmark Year

29 Jun 2018

The historic and transformational Goods and Services Tax (GST) completes one eventful year this week!

One of the most significant reforms in the field of indirect taxes in India, the landmark GST was introduced on 1st of July 2017. Its objective was to harmonize the tax regime of the country through the integration of most central and state indirect taxes and to eliminate cascading effects of taxation.

The GST ushered in a single tax system in the country, replacing 17 indirect taxes as well as a complicated tax structure in the country. A unified common tax is simple to administer and also benefits consumers by lowering the overall tax burden. The GST was unique in that it involved complete consensus between Union, state and Union Territory Governments, a tough act in an active democracy especially as state governments had to cede tax powers to the GST Council.  

The implementation of such a historic and transformational reform was not easy, but Government and industry were determined to make it a success. Feedback from industry across sectors indicates that the GST process has stabilized, demonstrating an exemplary speed and manner in introduction as compared to other countries.

During the first few months, the primary challenge was to educate and spread awareness among people about the nature of the tax as well the different rates of the tax for different products. Government and industry coordinated well with strong channels of communication to address procedural teething issues.

The high technology-driven nature of the new tax regime had to be understood, especially by the small businesses. The initial implementation saw delayed filings and uncertainty regarding Input Tax Credits (ITC), including for exporters, but these were quickly resolved.

As GST completes the first year of its rollout, it is evident that the major issues in its implementation have been deftly tackled by the Government in a systematic manner. The success of the new regime is now well entrenched and will go on to bring significant benefits for the economy.

Benefits of the New Tax Regime

The Goods and Services Tax Council (GSTC), chaired by the Union Finance Minister, was set up in August 2016 to address smooth implementation of the tax. The Council has ensured a seamless credit chain across the country and rationalized the rates for many goods based on industry feedback.

The Government organized several clearance drives to fast-track the refunds and filings and resolve IT glitches. Simultaneously, in partnership with industry, it also organized several awareness and learning sessions to promote better understanding of the system.

The Goods and Services Network (GSTN), the technology backbone of the new indirect tax regime, is a country-wide portal that places taxpayers and tax authorities on the same platform for the first time. It enables taxpayers to cut down time and costs in paying taxes and has undoubtedly increased efficiency.

GST Statistics Show Major Improvements

A major objective of the GST reform was to widen the tax net. As per the Economic Survey 2018, the number of unique indirect taxpayers increased by more than 50% to a substantial 3.4 million. Since then, the number has gone up to a reported 5.4 million.

Monthly GST revenue collections have been robust, while recording some fluctuations in initial months. With revenue collections crossing the Rs1 lakh crore mark for the first time during April 2018, at Rs 1.03 lakh crores, it was evident that the tax regime was stabilizing.

The GST collections during May 2018 fell marginally and stood at Rs 0.94 lakh cr            ores, but was still above the monthly average GST collection of Rs 0.91 lakh crores in FY 2017-18.

For FY 2017-18 (August 2017 until March 2018), total GST collections stood at Rs 7.17 lakh crores while cumulative collections till May 2018 reached Rs.  9.15 lakh crores.

GST Monthly Revenue Collections (In Rs. crores)