1. As a participant in preliminary to final discussion, and a member of Drafting Committee, Law Review Committee and Law Committee, I am bound to express my views on this, just passed, 7th anniversary of introduction of GST in India.
2. A good tax system should be simple, transparent, efficient and promote our rank in Ease of Doing Business (if we need FDI, which is dire need for India) for all stake holders, viz. taxpayer, consultants and Administration. Being a Regressive Tax, these characteristics are all the more necessary concomitants.
Fruits of GST for All
3. The astounding benefits to all are worth appreciating. Total online work (no carrying books, accountant and consultant to ever busy officer), adieu to multiple Tax Laws (Centre, State and Local bodies), varied rates, additional tax, surcharge, turnover tax (highest slabs being 35!) to limited slabs that are less than the cumulative effect of all taxes, almost single point, burying cascading (non-adjustable tax on Inter-State transactions and on Excise Duty & Service tax), worries to get Central and State declarations, are astronomical reliefs to all businesses. Today, all front and back-end operations of all taxing jurisdictions are performed on common portal of GSTN by all viz. Revenue, Taxpayer and consultants.
Revenue:
4. Arvind Subramanian’s report on Revenue Neutral Rate proposed average tax rate at 15.6% but by November 2017 the average tax rate had come down to 11.6%. The revenue from July 2017 was a mere Rs. 93,590 crore. The year 2017-18, the first year provided Rs. 7,19,078 lakh crore, a paltry monthly average of Rs. 79,897. Usual general growth in Central and State jurisdictions was around 5-6%. Considering 20-21 and 21-22 as no growth periods due to covid-19, with this growth rate, the revenue in 23-24 should have been Rs. 9,07,744 lakh crore. The GST revenue of year 23-24 is Rs. 20.18 lakh crore. Revenue for April 2024 at Rs. 2.10 lakh crore (highest ever) and for May 2024 at Rs. 1.73 lakh crore are the baby steps towards.
Stock Taking:
5. There is 2.8 times increase in revenue. Additionally, the registrations were 65 lakh (highly exaggerated) and today at 1.40 lakh (conservative) is a 2.15 times increase. It has contributed to the exceptionally high growth in Income tax as well. An energetic government may consider embarking on improvement, considering it as a cushion.
Next Steps – Short Term and Long Term
Short Term Measures
6. Such a hugely important tax like GST must strive for improvement continuously. After the introduction of GST in July 2017, the then late Finance Minister Arun Jaitley, set up a Law Review Committee (LRC) in September 2017 to review the Law. The LRC was disbanded after March 2018, but should be made a permanent body. The erstwhile LRC comprised only officers but now trade also should get a chance to represent.
7. Government has constituted a GoM for Rate rationalisation but again even after submission of its report and action taken, a permanent Fitment Committee, with representation from Trade is must.
8. Establishment of Tribunals for hearing Second Appeal has got delayed beyond legitimate expectations. The body should start the work as soon as possible. High Courts and Supreme Court do take up the cases, but the litigant is denied one additional opportunity, in particular about factual matters.
9. More than 12% of taxpayers have opted for composition and are paying 1% tax on turnover. Strangely their turnover in goods in most cases, is below Rs. 40 lakh. Opting for composition must be made conditional by a minimum fees of Rs. 40 thousand.
10. Around 70% of taxpayers are issuing less than 10 B2B invoices a month and are only traders. At one hand every B2B invoice must be made compulsory to be an e-invoice and on the other hand there must be a simpler return for these. A few basic questions regarding business in the beginning must hide many of unnecessary rows and columns. The higher compliance cost discourages compliance.
11. MSMEs hitherto enjoying exemption from Central Excise up to a turnover of Rs. 150 lakh need some hand-holding. Though the limit and expanse of these has been expanded, and some reliefs have been given, these still need some more help.
12. The provision in Section 129 attract penalty for “contravention of the provisions of this Act or the rules made thereunder” but nearly all the High Courts have ruled that there would be no penalty till there is intention to evade tax. The Section 130 mostly applies where there is “intention to evade tax”. These sections need revisit. While revisiting it is imperative that for mere breach of provisions (Section 129) the penalty should not be so high.
13. Lastly, the provisions of arrest under Section 69 ask for “reason to believe” is not commensurate with the business environment. It also need revisit.
14. The distribution of taxpayers between Centre was agreed upon a formula in 2017. It has been long time, the Council needs to visit it again.
Long Term Measures
15. GST in India is the greatest of culmination of an experiment where Centre and States have pooled their sovereignty to give birth to a Unified entity for India. This is precursor to many more such pooling. It must be nurtured to its full potential. The future should be ushered day by day or year by year. The matter in queue are Real Estate, Electricity Duty, Stamp Duty, Goods and passenger tax, Tax on Vehicles and believe me also the Alcoholic Liquor for Human Consumption.
Share this content: