• HDFC
• 07 Jul 2018
• Knowledge Centre

HDFC, Tester

A year after the country’s biggest indirect tax reform – the Goods and Services Tax (GST) –was introduced, it can be safely said that it has evolved significantly. However, there has been a fair share of serious implementation issues.

 

The new tax regime has replaced nearly seventeen existing state and central indirect taxes, such as central excise duty, additional customs duty, VAT, entertainment tax, service tax etc.

 

India Inc has been largely compliant with the changes ushered in. According to a research report, feedback from dealers, industry bodies and transporters discloses the fact that the E-Way Bill has been broadly accepted across the board, and carriers are reluctant to transport goods without it. Freight rates for the movement of goods without proper documents (including the E-Way Bill) have gone up considerably, with a reduction in trade incentives through informal channels.

 

There has been a phased inter-state and intra-state rollout, which has helped in the lowering of pressure on the system’s infrastructure.

 

Miles to go

 

The road ahead is expected to be a long one. As of now, the monthly average GST collection in FY18 stands at a distinctly low figure of Rs 89,900 crore. The Government has set a target of a monthly run rate of Rs 11, 65, 00 crores for FY19 (30% higher than FY18). Though GST collection in June 2018 came in notably higher at Rs 95,600 crore as compared to Rs 94,000 crore in May 2018, it was a one-off case.

 

The report summarizes the situation as it stands today. It states that there is a “tough task ahead in terms of the GST collections’ trajectory.” The smooth execution of GST will depend on the continuous use of anti-evasion measures and increased surveillance. Another aspect to be worked on is on-ground checking and inspection by officials to curb the unauthorized inter-state movement of goods. This has not picked up substantially.

 

Government Support

 

Though there are facts like these that need to be addressed, it can be said that the Government has been proactive in the past year following the launch of GST.

 

The Directorate General of GST Intelligence (DGSTI), a dedicated GST Intelligence unit, has been set up by the Government to ensure tax compliance. In addition to this, after studying the price structure, marketing patterns and classification of commodities, DGSTI is expected to increase surveillance and advise GST authorities on troublesome issues.

 

The Government is also expected to start a helpline number for consumer complaints soon. Consumers have been asked to be an active part of the GST process. They have been requested to insist on a bill on the purchase of goods, and also in the case of services rendered, and instantly report cases of misbehavior or non-cooperation by traders.

 

GST Advantage

 

According to Finance Minister Arun Jaitley, one of the biggest achievements of the new tax reform is that there will be no hidden taxes. Consumers will know exactly how much they are paying. He added that the Government may soon be looking at rationalizing GST rates as the tax regime stabilizes. “We will be busy in the process of shifting a large number of items from 28% to the lower rate,” said Mr. Jaitley.

 

He also revealed the Government’s intention to give the poor substantial relief and keep a majority of food items, agricultural products, and consumer goods exempt from taxation, while others would be taxed at a nominal rate.

 

Though the smoothening of the GST process is expected to take time, it cannot be denied that the Goods and Services Tax is a turning point in the country’s economy.