CMA Vinod Shete Mob.: 86980 76687 E-mail: Vinod_shete@rediffmail.com

In a historic moment, Goods and Service Tax (GST) was implemented at Parliament’s Central Hall on the intervening night of 30th June and 1st July. The launch event, being hailed as India’s second tryst with destiny after Independence on August 15, 1947, saw speeches from Finance Minister the late Shri. Arun Jaitley, Prime Minister Shri. Narendra Modi, and President late Shri. Pranab Mukherjee. PM Shri. Narendra Modi, in the historic Parliament address, termed GST as Good and Simple Tax for the nation. Further, President late Shri. Mukherjee said that “GST will create a strong incentive for buyers to deal with honest and compliant sellers who pay their dues promptly,” 

GST is basically an indirect tax that brings most of the taxes imposed on various goods and services at the point of manufacture, sale and consumption of goods and services under one umbrella at the National level. While in Pre GST-Era, taxes were levied separately on Goods and Services. 

Goods and Service Tax (GST) replaced all indirect taxes levied on goods and services by the Government, both Central and States. GST is one of the biggest Tax Reforms in India since its independence. 

The initial period was very stressful for the trade and the government, but over a period it has stabilized to a large extent though many issues remain unresolved. Till date there have been 47 GST Council Meetings to resolve the issues on the rate of tax, the amendments required in law, simplification of procedure etc. 

Further, during the crucial period of COVID pandemic, an extension given to the filing of GST returns and many other relaxations given under the GST Act would be helpful to the Companies and individual Taxpayers to focus on resumption of business processes and to regain the business as before COVID -19

Key Hits: 

1. 1. Focus on Rate Rationalization: There are four GST slabs currently in effect: 5%, 12%, 18%, and 28%. There are 480 goods in the 18 percent slab, which account for almost 70% of GST collections. Aside from that, there is a list of things that are exempt from the charge, such as unbranded and unpackaged food. There were 227 items in the 28 percent slab. Time-to-time discussion by the GST Council, with members of State Governments and Industry resulting in reducing the number of 227 items to less than fifty items under 28 per cent-slab. Only luxury items are now only in the highest tax bracket. Further, the GST council is reviewing proposal to correct inverted duty structure. An inverted duty structure refers to a situation where the tax rate on inputs purchased is higher than that on finished goods. 

• Tax compliance digitization: The government’s tax compliance automation has been a major success and has performed admirably, especially in comparison to the prior system. This has been made possible by the creation of GSTN, a “one-stop-shop” platform for all GST compliances. The epidemic, along with the implementation of the GST e-invoicing regime, has resulted in a steep learning curve, but firms, particularly SMEs, have been able to leverage this digital wave to boost growth and strengthen internal compliance processes as well. 

• Compliance Awareness: Compliance Awareness has increased in the Assessed which helps to identify the loopholes in revenue collection. Timely compliances boosting GST collection over the periods and the basic principle of Seamless Credit are achievable to the large extent as well. 

• Ease of doing business: More focus on Ease of doing business given by the Government, resultant into improving in the Ease of Doing Business rankings. The GST has played a significant role in this. Not only has GST reduced Inspector Raj, but it has also increased efficiency and more clarity in the tax system. More and more foreign businesses looking to invest in India can now have a clearer picture concerning taxes and administration. 

• E –invoicing: By introducing E – invoicing in the system is a major reform under the GST. It helps to increase the transparency level in the Business environment and Tax systems. Availing the input credit is much easier than the earlier system, which is useful for calculating output tax liability. 

• Small Taxpayer: The GST Council has given more emphasis on the easing the compliance burden on the Small Taxpayer by introducing relaxations in the various compliance matters, encourage them to fully participate a compliant Assessed. CBIC has introduced Quarterly Return Filing and Monthly of Taxes (QRMT) Scheme for Small Taxpayer whose annual turnover is less than Rs.5 Crores, allows filing 3B return Quarterly instead of monthly.

• Business Intelligence Tools: The primary skills required by taxpayers and authorities were built in the initial step using technology tools. The GSTN’s next goal was to use the technology and data at its disposal to improve compliance, combat fraud, and support policymaking. GSTN developed a Business Intelligence and Fraud Analytics (BIFA) section in March 2019, and the BIFA tool, which has become one of the most successful GST initiatives in the last five years, was created using artificial intelligence and machine learning. GSTN also sends a flow of internal reports to tax officers on a regular basis to help them improve their tax administration.

GST has increased overall business transparency concerning taxation and governance; not only is this important from the standpoint of businesses, it is crucial for consumers as well. Consumers now have an exact idea of how much tax they are paying for the products and services they purchase. Since GST requires complete information from producers of goods and services at every step of the way and requires the complementary filing of details in the returns, tax compliance is very high now. This has presented growth opportunities for the government. Higher tax compliance means more tax revenues, so that those revenues could be used for better infrastructure, more spending for social services, etc.

Key Focus Area:

1. 1. Seamless Credit: The purpose behind the implementation of GST was to ensure seamless tax credits across the entire value chain without any losses. However, the credit restrictions carried forward from the erstwhile regime add to the cost of businesses, blocking vital working capital for companies. The issue of the inverted duty structure also continues to be a hurdle as refund of input services is currently not allowed. As per Rule 88A of CGST Act – Input tax credit on account of integrated tax shall first be utilized towards payment of integrated tax, and the amount remaining, if any, may be utilized towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order. The main purpose of seamless credit flow is defeated due to change in order of utilization of the Input Credit Tax. Due to piling up of the input tax credit, the burden on working capital increases and leads to increases in finance cost. Needless to say, that, its impact on the bottom line of the business. The GST Council needs to review and make relaxations to the rules. 

• Widening scope of GST tax network: Petroleum products are currently exempt from GST. Hence, a significant section of the economy remains untaxed. If petroleum items were included in the GST net, companies would save cost, and the average person would pay less for petroleum products. 

• Anti –profiteering: Anti-profiteering provisions have been fraught with litigation as the current GST provisions do not prescribe any standard methodology/ mechanism for taxpayers to determine the quantum of the benefits to be passed on to the consumers. Appropriate guidance from the government is awaited on this area to reduce unnecessary disputes and litigation. 

• Investigations: Various companies and their top management are receiving notices/summons from the GST investigating authority. The goal is to prevent evasion. Genuine businesses have also been targeted by investigators, resulting in excessive hardship. In most situations, investigating agencies obtain concerns that are revenue neutral in nature or are backed up by stateby-state opposite advance judgements. There is also a gap. 

• SMEs: Indian economy is majorly driven by small business unit’s i.e. SMEs. It will be unfair to expect small-scale business firms to make the transition to an online IT platform and expect no errors in return filing. It is an uphill task for the m4ajority of their working staff which has little hands-on experience with IT solutions. The cost of SRP deployment is a major concern for micro-small-medium scale enterprises. This is a major challenge before GST Council, to develop an affordable IT platform for SMEs for smooth filing of the various returns and other compliances under the GST. It will help to increase in compliances by the number of small and medium taxpayer. 

• Formation of Tribunal: The Formation of The Tribunal is the need of the hour, mainly due to the huge number of appeals are pending. It will impact on Taxpayer by suffering long litigation, which creates uncertainty in Business. GST Council and CBIC need to take steps on priority for setting up The Tribunal being constituted with judicial and technical members.

Conclusion: 

During FIVE years journey, many changes are made in tax structure to make it more and simpler. Initiatives like introducing E invoice and new formats of returns will ease the filing process, more simplification brings more transparency in taxation system as well. Continuous efforts are being made to increase the registered dealer under GST and to widen the Tax Base. Efforts like the implementation of e-invoicing and the integration of inward and outbound supply returns with the main GST reports, revenues in June 2022 reached INR 1.44 lakh crore is the second – highest collection after the April 2022 collection of INR 1.67 lakh crore. As of March 31, 2022, India’s tax base had risen dramatically, with over 1.36 crore active GST registrations. The GST Council and Central Board of Indirect Taxes and Customs (CBIC) have played an important role to sort out grievances raised by taxpayers/businesses brings more clarity about the Provisions and Rules of GST Act. Compliances under GST needs to be simplified and made user-friendly, especially for small and medium sector enterprises, drive towards the government’s agenda of ‘Ease of Doing Business’.