7 Years of GST

Source-This post on 7 Years of GST has been created based on the article “7 years of GST: Balancing tech & transformation” published in “Business Standard” on 20 June 2024.

UPSC Syllabus–GS Paper-3– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context– The article discusses the performance of GST since its inception. GST has proven to be a game-changer for India’s digital economy. It has moved the country closer to the vision of “one nation, one tax.” This tech-driven tax system, supported by automation adopted by both government and businesses, has shown significant benefits.

What have been the achievements of GST in the last 7 years?

1) Digital Infrastructure-The effectiveness of GST relied on a strong compliance framework, made possible by the GST Network (GSTN), which simplified the processes of registration, tax payments, and filing returns for taxpayers.

2) Enhanced Compliance– GSTN has made compliance easier for businesses and tax authorities, equipping them with data analytics to detect and prevent tax evasion. Automation of tasks such as e-waybills, e-invoicing, and monthly returns has transformed tax compliance, setting an example for other countries to adopt similar practices.

3) Benefits for MSMEs –

A) MSMEs have greatly benefited from the simplified GST system. Measures like quarterly returns and relaxed GSTR-9C requirements have encouraged MSMEs to register under GST, leading to an increase in the taxpayer base.

B) GST has facilitated improved access to credit for MSMEs, which has accelerated their growth.

4) Unified Market and Competitiveness-

A) GST has introduced a unified system, established a common market, and eliminated tax cascading. This has enhanced the competitiveness of Indian businesses in both domestic and global markets.

B) GST has removed entry taxes and checkpoints at state borders. This has ensured smooth movement of goods, faster transit times, and reduced logistics costs for businesses.

What are the challenges in its implementation?

1) There are concerns related to some sectors that deal with an inverted duty structure.

2) Petroleum products have not been kept under the GST regime.

3) The GST law is still evolving, leading to disputes on various issues due to unfamiliarity and divergent positions

What should be the way forward?

1) Establishing a National Advance Ruling Authority-A National Advance Ruling Authority could ensure uniform interpretation of the law across the country, reducing uncertainty for businesses and minimizing disputes.

2) Dispute Resolution– A functional Goods and Services Tax Appellate Tribunal (GSTAT) could reduce the burden on High Courts. This can lead to faster and more efficient dispute resolution for businesses.

Read more- Five Years of GST: Achievements, Challenges and Way Ahead

3) Clarifying GST Complexities -Reintroducing FAQs tailored to specific sectors could offer clear guidance on the intricate details and complexities of GST.

4) Integration of Petroleum Products into GST -Including petroleum products in the GST system could ensure smooth input tax credit (ITC) flow across the supply chain. This will benefit both businesses and the overall economy.

5) Rate Rationalization and Simplification- Rate rationalization, simplification of the multi-tier rate system, and an amnesty scheme for regularizing initial period transactions could further improve the GST system.

Question for practice

What progress has GST made in the past 7 years? What are the hurdles in its execution? What steps should be taken moving forward?