The launch of GST will go down as an important milestone in the economic, financial and constitutional history of India. It was not only the culmination of decades of animated discussions and debates between political parties and financial experts, but also marked the first of many – the unique dual GST design, the novel GST legislative body (GST Council), and an unprecedented guarantee for five states. Year-on-year GST revenue growth. The key objectives and benefits of GST cannot be overemphasized – revenue buoyancy, negating tax cascading, preventing revenue leakage through input tax credit manipulation and most importantly, replacing a single destination-based consumption tax. and to rapidly increase the trade with the inclusion of several laws of the States and the Centre.
Not surprisingly, on the date of the introduction of GST, the preparedness of the government and business was far from desirable. GSTN – the single electronic compliance platform of GST – was not ready even with the most basic initial requirement, i.e. electronic registration of taxpayers and receipt of over 6 million sales, purchases and final tax computation returns on a monthly basis, by taxpayers filing GST law. According. This was followed by a series of compromises and delays that mocked the very edifice of the GST law – as matching the transaction level of input GST claimed by the buyer of goods and services on the basis of the return filed by the seller. and claimed. Such supplies could not be effectively combined, configured or verified by the GSTN portal. Moreover, the multiplicity of rates and complexities in the law only confused business and revenue officials alike as both could not keep pace with the hundreds of changes announced in the law and regulations in the first year of GST (around 1000 notifications and circulars so far). Both revenue and industry were partly to blame for this confusion. Apart from the fact that he did not invest in getting acquainted with the new law, he also opted to take a legal stance that suited his interests, irrespective of its merits. This short-sightedness has led to requests for decisions in advance ruling authorities and high courts or worse, petitions challenging several important provisions of the GST law (more than 3,000 so far).
Adversity brings out the best of man. The subsequent two years saw a change in the GST administration. Completely eliminating the need for filing purchase returns, better monitoring of returns, introduction of e-way bills, using risk management and data analysis for GST fraud detection, unmatched amount of input tax credit Limiting, and most importantly, stabilizing the GSTN platform ensured reduction in technical glitches, a problem that affected the GSTN in the first year of GST.
In subsequent years the compliance of GST registrars has increased progressively from around 70 lakhs to around 13 million. The revenue collection has also become progressively stagnant and has now consistently broken the initial benchmark of over one lakh crore revenue collection every month. The most important and notable change in the GST law was the introduction of e-invoicing and QR codes in a phased manner (from 1 October 2020) and this has been a major watershed in the GST journey. Simply put, the requirement of e-invoicing is that every business with an annual turnover of more than Rs 50 crore needs to obtain a unique challan registration number from the government’s invoice registration portal and embed it in an electronically readable QR code. Require (which also captures some other important data points) on each invoice it issues. This e-invoicing requirement is likely to be expanded and made mandatory for all GST registrants in a phased manner. This change has led to a sharp reduction in GST evasion. More importantly, it has enabled matching of transaction level of input GST received by the buyer and accounted for by the seller in the GST return filed with GSTN.
The onset of the pandemic in the first quarter of 2020 was another major challenge for the GST regime, with a sharp drop in economic activity and consequently a substantial fall in revenue collection (expanded by several duty concessions and return filing liberalisation) to account for the havoc wreaked by the pandemic To ease the burden of businesses). The GST Council again rose to the occasion and finally came out with a formula for compensation admissible to the states in the light of sharp decline in GST revenue across India.
With the benefit of foresight, GST implementation could have been easier with a better prepared GSTN, more thought through GST law and possibly with more time for training and familiarization with GST, both for revenue and business. Yet it need not be reminded that any delay in the implementation of GST may have provided one or more reasons for putting it on the backburner once again, perhaps forever. Again, the comparison to the GST rollout in India, in Australia or Canada, is one of chalk and cheese. This is so if one appreciates the fact that the number of taxpayers registered in GST in India is more than 1/3 of the entire population of these countries. Perhaps, a more valid comparison is with China – where the VAT rollout was nothing short of chaotic – even if we deny the fact that democracy has its challenges. Another important, but significant achievement in the transition to GST in India was its ability to check the onset of any GST induced inflation in the economy.
The future of GST in India is looking increasingly bright. The plan to use technology to conduct desk top audits and checks, to check fee fraud, and to introduce innovative taxpayer services should be a good sign for the taxpayer. The government may also privatize certain areas of revenue collection processes for better transparency and efficiency, for example RPA, AI and ML, using private expertise in data analytics based on invoice registration numbers, and even To consider introducing an alternative dispute mechanism such as a negotiated settlement process. The taxpayer should also match the revenue enthusiasm for automating GST compliance. GST provides a unique opportunity for taxpayers to reduce compliance cost by re-visiting their entire tax compliance process, for example, by increasing automation, using BOT for data extraction from ERP and verifying the authenticity of vendor invoices. To use tools.
GST will continue to be the poster boy of cooperative federalism in the Indian political landscape in the times to come. While GST in India has now entered the maturity stage of its growth curve, it needs to be nurtured to truly achieve its prime objective of one nation-one tax, the tax policy continues to be benign and non-intrusive. and the approach of the tax collector has been convenient and sympathetic to trade and industry.
Disclaimer:Atul Gupta is the Senior Director of Deloitte India. Views expressed are personal.
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