GST: Five Years On, How It’s Going For The Tax Reform

India's biggest tax reform completes five years.

Tax reform: The Goods and Services Tax (GST) was rolled out on 1 July 2017 midnight with the aim of streamlining the indirect taxation regime and reducing compliance burden.

• The GST subsumed over 17 taxes central and state taxes and 13 cesses.

• It has a four-rate structure based on the nature of the item taxed as determined by the government — 5 per cent, 12 per cent, 18 per cent, 28 per cent.

• Further, the collection from a cess levied on the highest tax slab of 28 per cent on luxury, sin, and demerit goods goes to a separate corpus called the “compensation fund,” which is used to compensate states for the revenue loss due to GST implementation.

• Before GST, the average tax payable amounted to 31 per cent on account of various taxes and their cascading effect.

Centre-state collaboration: The centre and states work together as part of the GST Council to work out modalities for smooth functioning of the tax regime.

• The Council has enabled uniformity in GST laws across the country.

• They have met 47 times so far and have taken measures to bump up monthly GST collection to record highs.

• GST collection is on course to Rs 1.4 lakh crore every month.

Recent GST flourish: A GST collection of Rs 1 lakh crore per month has become par for the course. And yet, the trend is looking upwards.

• The GST collection in April touched a record Rs 1.68 lakh crore, up 20 per cent from a year ago.

• The all-time high April figure was about Rs 25,000 crore more than the March figure of Rs 1.42 lakh crore.

• The May collection came up to Rs 1.41 lakh crore, lesser than in March and April, yet still registering a 44 per cent year-on-year increase and becoming the fourth-highest collection since the rollout.

Tech at work: Technology is the foundation for the GST regime.

• The GST Network provides the technological backbone for the indirect tax regime.

• It is said to be using artificial intelligence and machine learning to come up with newer data and plug revenue leakages.

• It provided an impetus to Indian companies to upgrade their technological infrastructure.

• A higher degree of automation in the process is becoming an increasing ask of the government.

GST review: The response has been favourable, with scope for improvement.

• Around 90 per cent Indian CXOs across key sectors have backed this indirect tax regime, as per a survey by Deloitte India. It was an online survey, undertaken over a four-week period, of 234 CXO and CXO-1 level individuals.

• 59 per cent industry leaders applauded the government’s approach of proactively issuing instructions, clarifications, and streamlining processes.

• The main challenge was identified to be increased tax regulations and reporting demands from tax authorities.

• A majority of industry professionals said that overall input credit management vis-à-vis GST rules is one of the top issues faced in complying with the GST law.

• Keeping track of the changing tax landscape and developments is a challenge too, especially for the consumer and the MSME sector.

• The tax regime still has a way to go, especially in saving time and easing taxpayer burden during audit and investigation proceedings.

Statements from the source:

• “#GST empowered Centre & State to levy taxes concurrently on a common base on all stages of the supply chain and unified the entire nation in terms of tax collection,” the Ministry of Finance tweeted today.

• “The move towards ‘one nation one tax’ was one of the most historic indirect tax reforms India had ever undertaken,” Chief Economic Adviser V Anantha Nageswaran wrote in the Mint.

Read More: 5 Years Of GST: What Are The Experts Saying