APRIL 01, 2025

By TIOL Edit team

PARLIAMENT's Standing Committee (PSC) on Finance has aptly flagged inordinate delay in operationalisation of Goods and Service Tax Appellate Tribunal (GSTAT) & its State branches under GST Act, 2017.

In its latest report on Department of Revenue's (DoR's) Demand for Grants (DFGs) for 2025-26 presented on 19th March 2025, PSC recommended: "utmost efforts be made to expedite and complete the remaining work related to GSTAT, ensuring it is operationalised at the earliest so that the envisaged benefits can be reaped without any further delay."

PSC was constrained to make this recommendation after taking on record DoR's reply to its query on the fate of its last year's similar recommendation on the same issue.

In its reply, DoR merely listed steps being taken to constitute principal and state benches of GSTAT. It didn't indicate any timeline to make the tribunals functional.

The Union Government should promptly decide and act on PSC's recommendations. Ideally, GSTAT should have been constituted in 2017 or 2018 to minimize taxation disputes and revenue arrears. GSTAT is expected to make GST system more robust and efficient. This, seven-to-eight years delay in making GSTAT functional smacks of policy paralysis. GSTAT is just one of the pending issues that constitute powerful agenda for GST reforms.

The reforms agenda is evident from the fact that seven Group of ministers (GoMs) constituted by GST Council (GSTC) are still grappling with the task assigned to them under their respective terms of reference. Many more GoMs have been closed ostensibly after completion of their mandate over the years. It is high time GSTC prods its GoMs to submit their reports at the earliest.

The GoM on Rate Rationalisation, which was constituted in September 2021, deserves special mention. It is yet to submit its final report. GoM, among other tasks, is mandated to "review the current rate slab structure of GST, including special rates, and recommend rationalization measures, including merger of tax rate slabs, required for a simpler rate structure in GST."

It is also expected to "review the current tax slab rates and recommend changes in the same as may be needed to garner required resources." Indecisiveness on such & similar issues is keeping GST in "work in progress" mode.

It is here pertinent to cite International Monetary Fund's (IMF's) latest, annual staff report on India released on 27th February 2025.

Pitching once again for simplification of GST structure, IMF report has reckoned the reforms being explored by GSTC through GoMs. As put by the Report, "The Group of Ministers is working on developing measures for rate rationalization, with the objective to simplify the rate structure. The final report on their recommendations is forthcoming and will be presented to the GST Council for deliberation. In parallel, the GST Network is working to estimate the revenue implications of rate changes, with the support of IMF capacity development."

The report has pitched for revenue-based, medium-term fiscal consolidation strategy with GST reforms. The strategy comprises six elements, of which, the first and key component is simplifying GST. Other elements include subsidy reforms, reversing excise duty cut on petroleum products and rationalizing central and centrally sponsored welfare and developmental schemes.

The strategy's implementation could "lead to an additional 0.9 percentage point of GDP narrowing of the deficit over the next five years, relative to the baseline."

It would be ideal if Modi Government finalizes GST reforms agenda by factoring recommendations from PSC, Comptroller and Auditor General (CAG), IMF, the World Bank and other institutions within three months.

The Centre can then take forward its comprehensive standpoint on GST reforms before the GST council (GSTC) for a final call. GSTC ought to coax its GoMs to complete their jobs within three months.

It is high time to shift GST from 'Work in Progress' incubator to GST take-off for the Viksit Bharat @2047. Let GST reforms be the test case for bureaucrats and ministers in acting on the Prime Minister Narendra Modi's vision for speed and scale.

The Union Finance Ministry, the States and GSTC should imbibe Mr. Modi's Sankalp for NDA Government to work three times faster in third term. PM articulated his resolve repeatedly after coming to power for third term in mid-2024.

Let GSTC inject in its work culture what Mr Modi advocated in his letter to the citizens from Kanyakumari on 3rd June 2024. He wrote: "We must make excellence the fundamental principle to make our country a 'Viksit Bharat'. We need to work quickly in all four directions: Speed, Scale, Scope, and Standards."