A year ago, India began a fresh journey into the indirect tax world, by entering into a new era of GST ‘one nation, one tax’. It has been a path-breaking reform, subsuming a number of federal and state taxes and paving the way for a uniform system of taxation. India became a common market
The removal of cascading made the goods more competitive in the international market and the availability of seamless credit on most goods and services has removed inefficiencies from the supply chains of most commodities.
GST has brought in a new era of fiscal federalism where the Centre and states share the powers to tax all goods and services, and all decisions taken in the GST Council are by consensus, after debate and discussion. Switching to GST has also resulted in bringing India at par with global laws, which adds to the ease of doing business in India and has increased profitability and efficiency, which, in turn, has attracted foreign investments.
GST is a work in progress, and to make the reform truly effective, central and state governments need to streamline law, procedures and compliances. The major challenge is that the compliance portal of GST, i.e. GSTN, is yet to achieve its true potential. Given the magnitude of the change, GSTN is still in the process of automating returns and has not been able to achieve the ability to match invoices from a credit perspective. This has led the government to propose simplification of the returns and, in the coming year, GST will move to a single return and credits being taken on the basis of invoice details uploaded by the vendor.
The structure has five rates for goods and services—0%, 5%, 12%, 18% and 28%, which must be further rationalised to make them simple so that the benefit from GST is maximised. This would also help in bringing the Indian taxation regime closer to international standards and resolve issues around interpretation and classification of goods and services, and hence reduce probability of disputes. Under GST, services industry has had to change its business processes on account of increase in compliances due to decentralised registrations as against the ease of single registration prevalent earlier.
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