GOOD WORK IN PROGRESS

The biggest reform in indirect taxation, GST replaced a complex and fragmented system, unified the tax structure, led to smoother logistics and boosted government revenue

THE IRELAND BASED FIRM RESEARCH AND MARKETS recently predicted that India’s warehouse market size would grow at around 15.6 per cent to reach $35 billion by the end of FY27, from around $14.6 billion in FY21. This is on top of the 17 per cent annual growth between FY16 and FY21. It was the time when the Centre started implementing a major indirect tax reform, Goods &Services Tax, in June 2017 that removed tax barriers and encouraged logistics firms to lease or set up larger warehouses. In one of the biggest reforms in the indirect ecosystem, the new tax replaced the 17 taxes levied by the Centre and states, including excise duty, service tax, value-added tax (VAT), and others. It brought uniformity in the tax structure across India, eliminating the cascading effect of taxes on prices of end products, since it is levied at each stage of the

ere is no consensus on merging taxes on petroleum products. e different tax slabs need to be harmonised too

supply chain, from the manufacturer to the consumer. It is applied to value addition at each stage, allowing for the seamless flow of credits and reducing the tax burden on the consumer. The positive effect of GST also reflects in smoother logistics movement, with goods-laden trucks not having to stop at the entry and exit points of states, eliminating the need for multiple compliance documents. It also expands tax revenues, with reduction in the process cost of tax collection. In FY24, the gross GST collection was Rs 20.14 lakh crore—crossing the Rs 20 lakh crore milestone for the first time—an 11.6 per cent increase over the previous year. However, there are issues related to products, like liquor, electricity, tobacco, octroi, stamp duties on land

& vehicle purchase etc. as well as zero rating GST on export of goods and services. Similarly, there is no consensus on merging taxes levied on petroleum products (crude, petrol, diesel, ATF & natural gas). GST is categorised into different tax slabs—5 per cent, 12 per cent, 18 per cent and 28 per cent. These slabs need to be harmonised for simplification of the process. The idea of a nationwide GST was first proposed by the Vijay Kelkar Task Force on indirect taxes in 2000. The objective was to replace the prevailing complex tax structure with a unified system. The Constitution Amendment Bill was introduced in 2011, but faced challenges regarding compensation to states and other issues. The Constitution (122nd Amendment) Bill, 2014 aimed to amend the Constitution to enable the implementation of GST. It was decided that a GST cess will be levied so that “loss”-making states can be compensated. Parliament passed it in August 2016. The GST Council with the Union finance minister and representatives from states was formed to make decisions about GST, including tax rates and exemptions. It played a crucial role in shaping the GST framework in India. ■