Goods & Services Tax: What Lies Ahead for India’s Ambitious Indirect Tax Reform?

    Goods and services tax, which we all know as GST, has been an essential part of every individual’s life for more than 5 years now. The Government of India implemented the goods and services tax in the nation in the year 2017. If you are wondering what lies ahead for India’s indirect tax reform, then make sure you read the whole article.

    The Goods and Services Tax, one of the biggest tax reforms India has ever had, successfully completed its five-year journey this year on June 30th. This nationwide tax regime, which includes 17 local levies such as service tax excise duty, VAT, and other 13 cesses, was rolled out on 1st July 2017.

    The four-rate structure

    Currently, in India, a four-rate GST structure is levied that imposes a comparatively low rate of tax, i.e., 5 percent implemented on essential items as well as the top rate of 28 percent implemented on cars. All the other slabs of the tax are 12% to 18%.

    The total GST revenue collection in 2022 (June) was 56% YoY (year-on-year) to over Rupees 1.44 lakh crore. GST collections gross in June 2022 is the second-highest, the first being the April 2022 collection of Rupees 1.68 lakh crore.

    Fiscal federalism

    GST also represents some unprecedented exercises in fiscal federalism because the Centre and states work together in GST Council so that they can thrash out modalities for an absolute smooth functioning of this relatively new tax regime. Thus far, the Council has come together 47 times, and this council has taken measures that have led to a GST collection of Rupees 1 lakh crore per month.

    GST Council

    Over the last few years, the Government of India has been proactively issuing clarifications and circulars to clear all doubts regarding taxations under the GST regime so that they can ensure ease of doing business. Recently, the GST Council has made a decision to ease compliance for all small taxpayers.

    Small taxpayers are those who supply using the e-commerce platform. These suppliers, who tend to make only intra-state supplies, do not seek GST registration in case their annual turnover is, in case of goods, less than Rs 40 lakhs, and in case of supplies, Rs 20 lakhs.

    Use of technology

    GST network provides all sorts of technical support to the indirect tax regime to help the tax officers in administration. They have been using AI (artificial intelligence) and machine learning to help them dish out upgraded and newer data and plug revenue leakages.

    But some tax experts seek a comparatively more straightforward structure for the GST. They are looking for a structure that can ensure a seamless flow of all input tax credits throughout the supply chain without facing any losses.

    These are some things that lie ahead for our country’s ambitious indirect tax reform that we call GST.