The much debated GST regime completed one year on Sunday, July 1’ 2018. The launch of GST or Goods and Services Tax was a landmark transformation of India’s indirect tax regime. It has been a hot topic for discussion for India since its launch. Even other nations are keenly observing its effect on the economy to learn its effect on the economy of nations.
The aim behind GST was to simplify the much-complicated taxation process by replacing the multiple indirect taxes by just one tax- GST. It is charged on the value added to a good at every stage of the production process. In this way, it removed the cascading effect of the earlier taxes that were applied one on the other. With its launch, the Government removed all the confusions that existed in the earlier regime for example, regarding inter-state payment of taxes that often was harmful to companies like Amazon that have to regularly transfer goods from one state to another. GST has also reduced the restrictions on inter-state movement of goods and this has led to an ease in the logistics planning of enterprises that have a presence in more than one state.
It also leads to non-evasion of tax as every transaction is now registered and at every subsequent transaction, the tax-payer looks forward to bill the buyer so as to obtain his own credit which he gets back from the tax payed by him.
Apprehensions surrounding GST-
The major cause of apprehensions amongst the criticisers of this new regime was the apprehension of difficulty that the businesses shall face in adjusting to this new regime. This apprehension is not unfounded as the new regime does demand proper records and online and timely payments. It was apprehended that such record keeping and dependency on digitization may increase the costs and compliance burden of small and medium-sized companies who cannot afford such expenditure.
This move was also resisted by several businesses and states that apprehended that it would lead to a loss of revenues. Now, as one year of GST comes to an end, it can be said that while there are some Small and Medium Enterprises that are suffering due to the higher tax slabs of their product, procedural glitches and their personal difficulty in ensuring compliance of GST, the larger picture is so far positive.
Moreover, by stressing on the documentation of records by Small and Medium Enterprises, the Government claims that it aims to strengthen the financial backbone as this documentation shall make them eligible for claiming various credit facilities.
At the end of one year of GST, we see apprehensions fading away-
The apprehensions about the loss of revenue have started fading away as GST is reaching its target run-rate at a good pace. Despite all procedural and other hassles, the implementation of GST by the Government has been praiseworthy so far. It attended to all doubts related to GST very promptly, improved the Information Technology dynamics very efficiently and was quick to change the tax slabs of products as and when needed. With the products under the 28% tax slab now coming down to around 50 in number, it is expected that all the non-sin products (sin products being cigarettes, alcohol etc.) shall soon be removed from this slab as the cross-sectoral ambit of GST increases further.
GST has been very useful in getting the unorganized sectors to pay taxes. It has increased the tax-paying base by around fifty percent. It is now to be seen how the areas excluded from GST like petroleum and electricity are brought within its ambit as GST stabilizes and the buoyancy of revenue increases even further. It is also to be seen how the Government forms a more informed policy as GST has led to its procuring better information for example about the export figures and the size of the informal sectors.
Way to Go-
The tax authorities (known as the GST council) have done a hard job of shifting the entire tax regime despite constant conflicts from public, politicians, businesses, and experts. They have tried to balance various dynamics like the economics, the public perception, the political disputes, the efficiency of businesses and the legal sphere in a just manner. It is now to see how this tax regime makes itself friendlier to the small and medium industries. An allegation on the GST Council has been that it is more favorable to the big enterprises due to their strong lobbying power. In order to be free from this alleged bias, it needs to align itself completely with the economic needs of the country which necessitate promoting medium and small enterprises. It is also to see whether it stands strong while the effects of populism try to shift its course in the general elections of 2019.
Author: Monisha Purmar