As the Goods and Services Tax (GST) enters its eighth anniversary, it stands as one of independent India’s most far-reaching tax reforms. Since its rollout in 2017, GST has steadily dismantled the complexities of the pre-existing indirect tax system, unified India’s internal market, and enhanced supply chain competitiveness along with ease of doing business. At completion of eight years of this introduction, it is time to envisage the road ahead.
Beyond any doubt, the implementation of GST in India is one of the key taxation reforms that not only changed the way businesses manage their taxes but also helped them adopt technology and improve efficiencies. From multiple state-level tax systems to a unified tax law, the GST revenue has grown from about ₹7.19 lakh crore in FY 2017-18 (for nine months) to ₹22.08 lakh crore in FY 2024-25, which reflects the level of economic growth in the country and growth in tax compliance.
While the GST law has largely overcome its teething issues in the past eight years, it would be critical to discuss how the law should evolve in the next decade to support the government’s initiative of ‘Viksit Bharat’ by 2047. While the government has initiated steps to simplify the law by rationalising the tax slabs and automating the compliance system, it would be essential to address the procedural challenges and high-value litigations on minor issues that are overshadowing the efforts of the government.
The transformation of the GST landscape in the next 10 years could be driven by three factors as under:
Rationalisation of Tax Rates
Simplification of the tax system and reducing the complexities of multiple tax rates would help the government bring more businesses under the ambit of GST and increase the tax base with improved compliance without levying higher rate of taxes on necessities.
A few steps are expected in the coming years to rationalise tax rates and remove complexities in the classification of goods or services. One is to reduce the number of tax rates to a 3-rate structure. The other is to phase out the compensation cess levy from April 2026 and likely increase in the upper limit of GST from the existing 40% to 60% to accommodate the loss of cess revenue or levy of new cesses. The reduction in tax rate slabs is also expected to reduce the classification related disputes, promoting ease of doing business.
Automation and Technology
Over the years, the government has automated parts of the GST compliance process through the introduction of e-invoicing, e-way bill, GSTR-2A/2B reconciliation statements and recently, by the proposed introduction of the Invoice Management System.
Currently, the GSTN system is advanced to an extent where both sales and purchase transactions are auto-populated in GST returns (GSTR-1 andGSTR-3B), except for B2C transactions and certain reverse charge transactions (larger organisations have automated even these transactions through API integrations with their ERP).
The government’s steps to make e-invoicing universally applicable for all B2C transactions would lead to complete automation of GST returns without any manual intervention and bring down the compliance burden on taxpayers through a reduction in the number of tax returns filed in a year. Further, this would increase the efficiency and transparency of the tax system and gradually reduce the amount of assessments and litigations.
Reimagining Tax Administration
The government needs to address the administrative challenges faced by taxpayers and implement a robust system and processes that would empower taxpayers to be fully compliant. The current challenges for taxpayers start with obtaining registrations, filing multiple monthly tax returns, and dealing with assessments/litigations in each state.
Therefore, the government can adopt measures including implementation of AI and technology-driven document verification system for granting GST registrations. Considering the inward and outward data is already available in the GSTN portal, the authorities can remove the requirement to file monthly tax returns and adopting a bi-annual or annual tax return filing system with payment of tax on a monthly basis.
Centralised audit/assessment for taxpayers having registrations in multiple states can be introduced. The tax authorities can implement stricter and uniform implementation of circulars across jurisdictions. In addition, the authorities can adopt technology solutions for determining eligibility of refund claims and processing refund claims to exporters while moving towards faceless assessments/litigations. Early operationalisation of GST Apallete Tribunals with time-bound disposal of appeals is also factored in.
The aforesaid measures in the next few years would help the government to bring stability and achieve the full potential of GST implementation in India and drive the country towards ‘Viksit Bharat’ by 2047.
—The author, Karthik Mani, is Partner, Indirect Tax, at BDO India. The views are personal.
Source: CNBC TV18
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