JANUARY 31, 2020

By Pritam Mahure, CA

ECONOMIC Survey 2019-20 ('ES') acknowledges that the Goods and Services Tax (GST) was a major structural reform. In this background, ES has discussed impact of GST on growth and tax revenues in detail as evident from the following -

1. GST was one of the major policy reforms

ES highlights that the introduction of GST has been a game changer for the Indian economy as it had replaced multi-layered, complex indirect tax structure with a simple, transparent and technology-driven tax regime. ES also states that GST has integrated India into a single common market by breaking barriers of inter-state trade and commerce by eliminating cascading of taxes and reducing transaction costs and in turn enhancing ease of doing business.

2. GST showed appetite of policy makers to introduce bold reforms

ES praises the policy makers by stating that the introduction of the GST represented a salient instance where policymakers exhibited the appetite to introduce bold reform by eschewing loss aversion, whereby a policy that creates some short-term losses while creating large long-term benefits may lack enough support.

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

ES mentions that the launch of the GST in July, 2017 added a new dimension to Centre-State and inter-State financial relations and the GST Council experience provides key learning for implementing cooperative federalism in several other areas such as labour and land regulation.

4. About New Return System

ES states that the New Return System is proposed to be introduced w.e.f. 01.04.2020 will aim to reduce manual efforts and uses technology extensively, while maintaining a similar working model by having a single main return (GST RET-1/2/3) supported by two annexures (GST ANX-1 & GST ANX-2) that work dynamically.

5. About E-invoicing

ES shares that the Government has proposed to introduce electronic invoicing system (e-invoice) for all B2B invoices in a phased manner as it is proposed to make e-invoicing mandatory for those having annual turnover of more than 100 crores w.e.f. 01.04.2020. ES states that this would help in seamless flow of credit and invoice matching as envisaged in the GST regime and it would help in real-time updation of data on the GSTN system and thereby, drastically reducing the time taken in filing the returns.

6. In FY 2019-20, five times GST revenue crossed 1 lac crore p.m.

ES highlights that so far, during 2019-20, despite the rationalisation of GST rates, the gross GST monthly collections has crossed the mark of 'one lakh crore' for a total of five times, including the consecutive months of November 2019 and December 2019.

ES attributes the increase in GST collections to concerted efforts taken by the Government to improve tax compliance and Tax revenue collection such as extensive automation of business processes, application of e-way bill mechanism, targeted action on compliance verification, enforcement based on risk assessment and proposed introduction of electronic invoice system etc.

7. Compliance rating to be made available soon

ES shares that the Government is in the process of finalising the method of computation of 'compliance rating' and once finalised would be made available in public domain, which would enable buyers to choose compliant taxpayers for doing business.

Further, ES mentions that the Government has decided to issue a certificate to compliant GST taxpayers, and acknowledge their contribution towards nation building.

8. One Nation, One Cash Ledger

ES states w.e.f. 01.02.2020 'Unified Cash Ledger' will be rolled out as well as rationalisation of the ledger is on the anvil.

9. Matching of datasets

ES shares that the datasets that utilise information across various datasets can also improve public service delivery, for example, cross-verification of the Income tax return with the GST return can highlight possible tax evasion.

10. About criticism on GST

ES acknowledges that there are criticisms of the implementation of the GST. ES states that there are too many rates, too large a set of commodities has been excluded, and the system is more complex than it needs to be especially in the matter of crediting taxes paid on inputs and providing refunds to exporters. ES also concedes that the Government has acknowledged many of these problems.

Way forward:

With the detailed discussion on GST in ES and as only five months are left to celebrate three years of GST introduction, now industry will eagerly await a detailed roadmap for GST in tomorrow's Union Budget.

(The article is co-authored by CA Vaishali Kharde, Associate Director and CA Sahil Tharani, Executive at Pritam Mahure and Associates. The views expressed are strictly personal.)