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)
Source: PIB Press Releases
The number of return filings also registered a significant increase from 3.83 million in July 2017 to 5.46 million in March 2018, registering a growth rate of 42%.
Source: PIB Press Releases
The e-Way Bill system has been rapidly transforming the transport of goods, eliminating barriers, facilitating trade and industry, and ensuring better compliance. More than 4.15 crore e-Way bills have been successfully generated as on 13th May 2018, including more than one crore e-way bills for intra-state movement of goods.
Certain areas such as electricity, oil and gas, alcohol and real estate continue to be out of the ambit of GST. Inclusion of these items would facilitate seamless input tax credit availability across sectors. Industry also expects that after stabilization, there would be space to reduce the number of tax slabs. Other procedural issues continue to be addressed by the GST Council.
The GST reform is indeed a transformative reform that promises to greatly increase the efficiency and productivity of the economy and encourage growth through better tax compliance, lower transaction costs and a unified market system. A lookback over the year shows that GST has successfully taken off and the system is stabilizing.
The Confederation of Indian Industry (CII) has regularly provided inputs to the government on behalf of Members regarding GST implementation. CII has also taken up specific issues through meetings with Government officials and submitted detailed memorandums on GST laws, GST rates and GSTN issues to the Ministry of Finance.
The National Academy of Customs, Indirect Taxes & Narcotics (NACIN) has granted CII an accreditation for imparting GST Training. CII conducted more than 100 training programs on GST across the country with more than 5000 participants from diverse sectors. Additionally, CII also organized live interactive sessions with the Finance and Revenue Secretaries to discuss GST implementation and transitional challenges.
An important CII recommendation was the rationalization of rates in many categories of goods, especially in the 28% slab. Based on the CII suggestion, the GST Council rationalized the tax rates on various goods and services.
CII continues to take up advocacy initiatives and spread awareness on GST and its benefits for the general public as well as its members. It will remain proactively engaged with the Government for the successful implementation of the reform.
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