• Notification Date: 14-06-2023
• Notification No: N/A

GST Regime completes Six Years in India

India's most transformative tax reforms since Independence in the form of Goods and Services Tax completes six years in July this year. It has brought about a paradigm shift in India's indirect tax structure, simplifying the system and boosting tax both for the Centre and the states, as a slew of Central and State taxes were merged into GST.   

In April, GST collections reached an all-time monthly high of ₹1.87 lakh crore, a 12 per cent increase compared to the previous year. There was substantial growth across sectors and states in most large states during the same period, indicating broad-based growth. E-way bills generated in March 2023 amounted to 90 million, an 11 per cent increase compared to the preceding month's 81 million. 

Record-high Collections 

Despite macroeconomic headwinds, the GST regime has witnessed record-high tax collections. Continuous efforts to widen the taxpayer base through measures such as rationalisation of tax slabs in the Income Tax segment, the e-way bill system and data analytics to identify potential tax evaders have contributed to the ever-increasing tax collections. 

Furthermore, the introduction of the Goods and Services Tax Network (GSTN) has improved tax administration efficiency and effectiveness. Digitalisation of processes, including online return filing and simplified tax payment mechanisms has eased compliance for businesses, boosting tax collections. Integration of technology, including artificial intelligence and machine learning, has further strengthened tax administration and minimised tax evasion. 

Key Reform Areas 

However, even as we commemorate six years of GST regime, it is imperative to identify areas that demand further reforms. Streamlining of tax brackets in one such area. It is vital to prioritise the consolidation of tax rates, reducing the current array of four slabs (5 per cent, 12 per cent, 18 per cent, and 28 per cent) to a more efficient three-tier structure.  

Moreover, the inclusion of petroleum products within the ambit of the GST rate framework should be a focal point. If a consensus on including passenger fuel in the GST structure requires more time, the GST Council should begin by including aviation turbine fuel (ATF) and natural gas. At the moment, petroleum products, along with certain items like electricity and alcohol, remain outside the jurisdiction of GST. However, it is crucial for the government to strike a delicate balance between revenue generation and providing relief to industries that bear the burden of high tax rates. 

Bottlenecks & Challenges 

India's GST regime has brought transformative changes to the country's indirect tax structure, promoting efficiency, transparency, and unity. However, there are areas that require immediate attention to unlock the regime's full potential and ensure sustainable economic growth. One pressing issue is the delay in export refunds, which adversely affects businesses relying on timely reimbursements. This delay raises concerns about the system's efficiency and its ability to support businesses effectively.  

Another challenge is the complex penalties faced by businesses, as they struggle to monitor vendor behaviour and contend that they should not be penalised for their vendors' compliance deficiencies after fulfilling their GST obligations. These issues highlight the need for reforms to address the concerns of businesses and individuals.  

The government aims to enhance the tax system's efficiency and user-friendliness by implementing reforms in tax administration, reducing tax rate anomalies, and ensuring seamless integration between state and central tax systems. Through these efforts, India can maximise the benefits of this transformative tax framework for years to come.