1 Year of GST: Paradigm Shift in Indirect Taxation

Published on 01.07.2018 in Central Chronicle (English)

It was 1st of July, 2017, the most awaited Goods and Services Tax was launched nationwide. There were fears, apprehensions and multiplicity of views on its launch. Many thought that it would not succeed and would create chaos in market whereas few were confident that it is going to be a historic moment in history of independent India. The day arrived and GST created history on 1st of July 2017. A paradigm shift had taken place in the domain of indirect taxation in this country. 

The objectives of introduction of GST in brief:

To create single national market:  it was to create uniformity in the domain of indirect taxation in this country. Objective was also to eliminate the multiplicity of taxes at Central and State levels. In total 17 Central and State Taxes and Cesses were subsumed in GST. Another broad objective was to eliminate long queues of trucks at various state border check posts to create a seamless national market. It eliminated delays which earlier added to the logistic and transactional costs of goods movements which was ultimately borne by the end consumer. 

to create One Nation One Tax: at Center and State levels there were multiplicity of taxes and business people were forced to file as many as 17 returns on monthly, half yearly and annual basis which were not just time consuming but also wasted quality time which could have been allocated to generation of business. Introduction of GST thus helped in increased efficiency in entire chain of business – production, supply chain, storage and distribution. 

Tax Rates and slab rationalization: since earlier tax regimes of Central Excise, Service tax and VAT and few other taxes had many slabs and created utter confusion for assesses. Objective here was to create simple tax structure with few slabs to make life easier for business community. Though objective was to create single tax slab for all but that was simply not feasible and government had to create 5 major slabs for taxation structure. There are talks now to merge few slabs to make it simpler for the purpose of “ease of doing business.” 

Tax revenue will go up and leakages will be plugged: there were wild speculations among experts on this issue but all apprehensions were laid to rest and in one year GST appears to be settling though there have been plethora of teething problems which crippled the efficiency of system. On an average 1 lac Crore of Tax Revenue per month is expected in this financial year of 2018-19 and it will definitely prop up gross domestic product of country. In a way it was formalization of tax economy which gathered pace. 

Inflation control: it was expected that with introduction of GST the inflation could be effectively controlled. It proved true as any kind of fear of higher set of inflation has not happened after introduction.  

To create independent body of GST Council: it was probably one of most important sovereign feature of tax administration. An independent body was created by Constitutional amendment and so far it has worked very well but much more is needed on this front in coming years. 

What crippled GST?

Compliance has been very poor: there were multiplicity of reasons for noncompliance. System glitches could not be resolved in time. The return filing system was revised and re-revised to meet exigencies. Business in common struggled for many months and there were utter confusions. The war rooms created just could not handle pressure and many a times system broke down. The skeptics then had field days. It is expected that by end of this year, as promised, government will come out with single return to ease the business hassles. 

Multiplicity of registrations caused huge problems: while GST was introduced with the objective of one nation one tax but multiplicity of registrations in many states and union territories leading to multiple assessments and filing of returns made life extremely difficult for business. This problems is yet to be resolved fully. A large number of assesses are still not filing returns which is a worrisome feature. 

E Way Bills complications: On February 1 2018 it was introduced and it bombed badly. It was immediately withdrawn and glitches were resolved. Government came back with better prepared version and it has started faring well. It will also help in curbing the tax evasion effectively. 

What is still pending: some of major aims to be realized in near future are formalization of economy, expansion of tax base, GST returns simplifications, streamlining the refund systems, lowering of tax rates and merging of few tax slabs, lowering of litigations, uniformity in Advance Ruling mechanisms and matching systems of invoices apart from technical glitches which had marred the system and created huge hardships for business. 

To sum up: One of the major objective of introduction of GST was to rationalize the prices through uniform taxation all over country and it was expected that prices may go down qualitatively for consumers but on this front nothing much has happened. Barring for a brief period when some of the producers and service providers reduced prices marginally things were back to old pattern. 

It is just one year after introduction and it can be satisfactorily said that the GST introduction has been one of most important event in history of independent India. The system is settling down and it has been praised by many international experts and agencies. GST is future of indirect taxation and will definitely go in a long way in curbing the evasion and will help in formalizing the economy and building a strong nation and of course “One nation one market.”

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