JULY 05, 2019

By Pritam Mahure, CA

ECONOMIC Survey 2018-19 (ES) acknowledges that the Government's efforts to improve the present tax regime by introducing GST and Insolvency and Bankruptcy Code have had a profound impact on improving Ease of Doing Business (EODB) in India.

In this background, ES highlights critical facts pertaining to GST as well as its impact on economy and tax revenues as discussed in following paras.

1. GST indicated Government's appetite for bold reforms

ES specifies that the introduction of the GST represented a salient instance where policymakers exhibited the appetite to introduce bold reforms by eschewing loss aversion, whereby a policy that creates some short-term losses while creating large long-term benefits.

ES also states that the introduction of GST barely increased the economic policy uncertainty despite the enormous change that it entailed and this indicates that reforms which are consistent with a well-articulated vision do not create as much disruption as is typically feared.

2. GST added a new dimension to Centre-State relations

ES highlights that the launch of the GST has added a new dimension to Centre-State and inter-State financial relations as well as the GST Council experience provided key learning for implementing cooperative federalism in several other areas such as labour and land regulation.

3. Government was pro-active in GST implementation

ES mentions that Government has been very pro-active in ensuring that GST gets implemented smoothly. GST Law/Rules/procedures have been adapted to the needs of the trade and industry. To this effect, since the date of introduction, Centre has issued 495 notifications, 101 circulars, 18 orders, 12 removal of difficulties orders & more than 125 press releases (as on 28.02.2019).

4. Government was a beneficiary

ES mentions that being able to retrieve authentic data and documents instantly, Government has benefitted, for example, cross-verification of the income tax return with the GST return can highlight possible tax evasion.

5. New return system

ES states that as per the new return filing system, there would be only one return form to be filed monthly (though it will actually be 3 returns i.e. ANX 1, ANX 2 and RET 1).

ES also states that misuse of ITC due to default in payment of tax by the supplier shall be controlled primarily by recovery of tax from the supplier and reversal of credit from buyer shall also be an option available with the revenue authorities in certain exceptional circumstances.

6. For FY 2019-20, stabilization of GST is a priority

ES concedes that after the initial transitional issues following the roll-out of GST, revenue collection picked up from annual average of 89.8 thousand crore in 2017-18 to 98.1 thousand crore in 2018-19. However, the Gross Tax Revenue as a proportion of GDP declined to 10.9 per cent of GDP in 2018-19 (PA), lower by 0.3 percentage points as compared to 2017-18 primarily due to shortfall in GST collections.

ES states that, going forward, sustaining improvement in tax collection for revenue buoyancy of GST will be a key to improved resource position of both Central and State Governments.

7. Way forward

GST was a magnum opus change and the biggest indirect tax reform after independence. Thus, though many things have been done, still it leaves a lot to be desired.

Now, looking at Governments likely measures to increase GST revenue through a series of changes (such as GST 2.0 returns etc.), GST payers and consultants will have to roll up their sleeves (again!).

(The writer has authored more than ten books on GST, How to be Future Proof and Global VAT. The views expressed are strictly personal.)