GST will im­prove our com­pet­i­tive­ness

The econ­omy will ben­e­fit as the tax is ush­er­ing in higher trans­parency, low­er­ing trans­ac­tion costs and im­prov­ing com­pli­ance

The Hindu Business Line - - THINK - CHANDRAJIT BAN­ER­JEE

Once again, the GST Coun­cil has made im­por­tant mod­i­fi­ca­tions to the GST regime that will re­in­force its growth po­tency. By rais­ing thresh­olds, low­er­ing fre­quency of re­turns and in­clud­ing ser­vices un­der the com­po­si­tion scheme, the Coun­cil has boosted ‘ease of do­ing busi­ness’ for small en­ter­prises.

In­dia’s re­form jour­ney took a huge leap for­ward with in­tro­duc­tion of the GST. Bring­ing to­gether Cen­tral and State gov­ern­ments and in­te­grat­ing nu­mer­ous in­di­rect taxes, GST is a far-reach­ing tax sys­tem and, as such, it is only to be ex­pected that its full roll­out would re­quire an ad­just­ment pe­riod.

Un­de­ni­able gains

GST has fi­nally trans­formed In­dia into one uni­fied mar­ket­place. For the first time, man­u­fac­tured goods and ser­vices are on the same tax plat­form and all prod­ucts and ser­vices are sub­ject to the same tax rates through­out the coun­try.

GST dis­man­tled in­ter-State tax bar­ri­ers for seam­less trans­porta­tion. Ar­ti­fi­cial dis­tor­tions in the sup­ply chain, as for ex­am­ple, cre­at­ing de­pots in all States to avoid cen­tral sales tax, are be­hind us now. In­dia suc­cess­fully man­aged to get two GSTs to flow to­gether in a unique struc­ture which has not been seen in other coun­tries.

Av­er­age monthly rev­enues have been on the up­trend over the last 18 months.

The num­ber of re­turns filed has gone up from 3.76 mil­lion for Au­gust 2017 to 7.2 mil­lion in De­cem­ber 2018.

This re­flects a ris­ing cul­ture of com­pli­ance. Man­u­fac­tur­ers and traders who had re­mained out of the tax net now find it ad­van­ta­geous to be part of the for­mal sup­ply chain un­der GST. To­day, about 11.7 mil­lion en­ter­prises are reg­is­tered, with over five mil­lion of these be­ing new reg­is­tra­tions.

Un­der the com­po­si­tion scheme where smaller en­ter­prises pay as per fixed tax rates, an­other 1.8 mil­lion have signed up.

The re­cent de­ci­sions of the GST Coun­cil are likely to cut the num­ber of en­ter­prises cov­ered un­der GST from April; how­ever, this is out­weighed by the re­lief pro­vided to these small units. in store

The ris­ing cov­er­age is de­spite the fact that ad­her­ing to GST means large-scale change in pro­cesses, for­mats of in­voices, tax ac­count­ing and co­or­di­na­tion up and down the sup­ply chain.

En­cour­ag­ingly, many op­er­a­tional is­sues have been ad­dressed on a real-time ba­sis by the GST Coun­cil of State fi­nance min­is­ters chaired by the Union Fi­nance Min­is­ter. Over 32 meet­ings, they have con­sid­ered de­tailed in­puts from in­dus­try and pro­vided work­able so­lu­tions. These have greatly raised con­fi­dence in the sys­tem.

In­put tax credit re­funds are gen­er­ally quick and reg­u­lar, stream­lin­ing the whole sup­ply chain. Ini­tial tech­ni­cal is­sues on the GST Net­work are also largely re­solved.

De­fer­ment of GSTR 2 and in­tro­duc­tion of the sim­pli­fied new re­turn fil­ing model have brought in ef­fi­ciency. Spe­cial drives have ad­dressed de­lays in re­fund of IGST on ex­ports and ac­cu­mu­lated in­put tax cred­its due to in­verted tax struc­ture.

For con­sumers, the over­all ben­e­fits have been sig­nif­i­cant. Tax rates have been con­tin­u­ously re­duced on key items, leav­ing only about 30 items in the high­est bracket and most mass con­sump­tion goods in the lower cat­e­gories.

Elim­i­na­tion of cas­cad­ing tax­a­tion and lower lo­gis­tics costs have sta­bilised prices. Fur­ther, con­sumer pro­tec­tion through anti-prof­i­teer­ing pro­vi­sions has en­sured that the ben­e­fits of in­put tax credit or re­duc­tion in tax rates are passed on to the con­sumers.

As the en­tire ecosys­tem be­comes ac­cus­tomed to this regime, an ef­fi­cient busi­ness en­vi­ron­ment will emerge with higher trans­parency, lower trans­ac­tion costs and bet­ter com­pli­ance.

Some tweaks needed

Go­ing for­ward, some pro­vi­sions of the GST laws need to be sim­pli­fied and in­con­sis­ten­cies should be re­moved. Pe­tro­leum prod­ucts, al­co­hol, elec­tric­ity and real es­tate may be brought un­der GST am­bit for pro­vid­ing seam­less in­put tax credit across sec­tors. The num­ber of rates too can be re­duced to just three slabs, stan­dard rates on items of mass con­sump­tion, de­merit goods in the high­est tax cat­e­gory, and cer­tain items at a lower slab.

The gov­ern­ment is al­ready work­ing on these is­sues and in time to come, GST would not only ben­e­fit busi­nesses and con­sumers but also strengthen In­dia’s com­pet­i­tive­ness in the global mar­ket­place. On the whole, GST is mov­ing to­wards a stable com­pli­ance en­vi­ron­ment, buoy­ancy in tax rev­enues, ex­pan­sion of tax base and for­mal­i­sa­tion of the econ­omy, achiev­ing its vi­sion as a trans­for­ma­tive tax.

The writer is Di­rec­tor Gen­eral, Con­fed­er­a­tion of In­dian In­dus­try

Much gain

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