JULY 23, 2024

By CA Vaishali Kharde

THE journey of GST has been marked by frequent updates and clarifications, significantly impacting businesses across sectors. These amendments are often introduced to streamline processes, enhance compliance, and address emerging challenges on the tax landscape.

Economic Survey 2023-24 [ES 23-24] has provided valuable insights of GST in India, highlighting successes. This article aims to discuss summary of ES 23-24 from GST perspective along with our comments.

Remarkable increase in GST Collection for FY 2023-24

As per ES 23-24, both Goods and Services Tax (GST) collections and the issuance of e-way bills, reflecting wholesale and retail trade, demonstrated double-digit growth in FY 24. More than 1.3 crore entities are registered under GST and filing returns.

ES 23-24 also highlighted that the increase in indirect taxes in FY 24 was mainly driven by a 12.7% growth in GST collection. The increase has been equally pronounced for both intra-state trade and inter-state trade. The increase in GST collection and E-way bill generation reflects increased compliance over time.

Our Comment

Action taken by the Government in case of fake invoicing racket is really appreciable. However, certain genuine taxpayers are also suffering due to certain measures undertaken from GST perspective for collection of GST revenue. One such provision as implemented where GST disclosed in GSTR-1 but not paid in GSTR-3B (i.e. GSTR-1 is higher than GSTR-3B) can be recovered as self-assessment tax. It is observed that the Authorities are initiating recovery immediately. The difference could be on account of inadvertent error while filing of GSTR-1 and other reasons. Immediate recovery is not only impacting creditability of business but also affecting working capital planning.

Rationalisation of GST Rate Structure

ES 23-24 highlighted that over the last 7 years, GST has matured significantly through streamlining of procedures and, in the process, enhancing tax buoyancy for the Union and State governments.

There have been calls for further rationalisation of rate structure to compress the number of rates, elimination of rate inversions, introduction of broad-band rates for similar products and expanding the tax base.

Our Comment

At present, the taxpayers are struggling with maze of amendments by way of Notifications, Circulars, Orders along with litigation. Thus, complexities introduced on account of amendments and clarification require businesses to stay vigilant and adapt swiftly to remain compliant.

Impact on Logistics Efficiency

ES 23-24 has highlighted that, GST has played a remarkable role in reducing logistics costs. The 'One Nation, One Tax' regime has ensured that trucks do not have to wait for hours on state borders, which has reduced travel time by up to 30%. This has reduced the logistics cost and increased the average distance trucks travel from 225 km before GST to 300- 325 km as per a Ministry of Road Transport and Highways report.

ES also highlighted that it has been adding to the ease of doing business and the growth of manufacturing in the country. An NCAER study of December 2023 has shown that the logistics cost in the economy has declined by 0.8 to 0.9 percentage points of GDP between FY 14 and FY 22.

Our Comment

While the reduction in waiting times due to measures like the e-way bill is noted, the current compliance burden remains significant with requirements for both e-way bills and e-invoices. Simplifying these processes further could alleviate compliance costs for businesses.

In summary, while ES 23-24 recognizes the positive impact of GST implementation, it also underscores the ongoing challenges and areas needing refinement. However, to enhance GST stability and effectiveness it may require differentiation between serious and less serious offences while imposing harsh penalty, spreading awareness among taxpayers regarding common mistakes, encouraging voluntary compliance and expediting the resolution of disputes.

Addressing these challenges through strategic reforms and policy adjustments will be crucial for maintaining GST's role as a catalyst for economic growth while ensuring a conducive environment for business.

(The Author is a Chartered Accountant, Founder and CEO of CA Vaishali B Kharde and Company. The Author has authored and co-authored books on GST and litigation.)