The Goods and Services Tax (GST) was implemented in India on 1 July 2017. GST was supposed to go live in April 2010; however, due to the difference of opinions amongst the stakeholders and other political issues, its implementation was delayed. GST is regarded as the major taxation and economic reform that was implemented in the country since Independence.
The main aim of introducing GST was to subsume several types of indirect taxes such as Central Excise Tax, Service Tax, VAT/Sales Tax, etc., and implement a single taxation system in India. The reform was finally implemented with effect from 1 July 2017 after almost a decade of intense debate. GST subsumed nearly all indirect taxes at the Central and State levels.
GST is a destination-based, multi-stage, and comprehensive tax which has helped in streamlining various indirect taxes. The introduction of GST received immense support from the industry. GST also allowed businesses to simplify their distribution systems (supply chain, production, and storage) and helped in making them more efficient. Previously, businesses were forced to design their distribution systems keeping state taxes in their mind.
However, industries and businesses faced a lot of challenges after the implementation of GST. To name a few:
- Problems in understanding new concepts
- High tax rates for certain goods and services
- Complex documentation
- Unclear treatment of various common transactions
- The matching concept with regards to claiming Input Tax Credit (ITC)
- Ambiguous Anti-Profiteering aspects
- Cumbersome registration system
- GST refund problem for exports
As far as the journey of GST is concerned, yes, it has seen a lot of progress from its early days of implementation. As far as the consumers are concerned, a common rate structure across states have made their decision making easier. For consumers, the prices of goods and services have either remained stable or gone down. Accessibility has improved for consumers because the supply chain efficiency increased after the implementation of GST. When it comes to businesses, there is still a lot of scope for improvement.
A simplified tax regime, a broader tax base, and fewer slabs are a few important things the current government needs to take action on in this financial year ahead.
Also, many goods still do not come under the GST bracket and hinder the seamless flow of ITC. Electricity, petroleum goods, real estate, and alcohol still remain outside the GST net. Including real estate under GST might be a difficult task to accomplish since it will need a constitutional amendment. Aviation fuel and natural gas could be included under GST’s ambit. However, the inclusion of petrol, diesel, and kerosene may prove to be a challenging task. Most of the states have raised objections to such a move.
In the days to come, there needs to be a further rationalisation of tax rates and compliance need to be simplified. Also, administrative aspects and dispute resolution need to be the key focus areas. The overall GST system needs to align with global best practices. We will need to wait and see how different the new version of GST returns is going to be with regards to functionality and GST return filing.