The Goods and Services Tax (GST) is one of the biggest tax reforms in India. Though only a few weeks old, the latest tax is now firmly embedded in the millions of transactions happening all over the country every day, since the historic first of July, 2017, a watershed in Indian taxation history.
The key to the successful implementation of the GST was through a consultative forum which worked towards consensus among States with diverse interests in a federal structure. The goal of GST, which is ‘one nation, one tax, one market,’ a shot-in-the-arm for the country’s ease-of-doing-business initiatives, is laudable.
Disruptions are inevitable in the short term, but in the long term, GST is likely to achieve improvements in the system efficiency, simplification and rationalisation of taxes, and the shift of business activity from the unorganised to the organised segment. The resultant widening of tax base, along with traceability of transactions, is bound to add to the exchequer despite reduction in tax burden on the consumption of common goods.
Uniform interface, a first
GSTN or the GST Network, cutting through traditional silos, has established for the first time a uniform interface for the taxpayer and a common and shared IT (information technology) infrastructure between the Centre and the States. A complex exercise involving the integration of the entire indirect tax ecosystem, the tax regime has brought all the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and external stakeholders. Commendable and unprecedented handholding has been seen, with the taxman engaging in conversation with enterprises, chambers of commerce and industry bodies such as the CII, right through the transition, and more continually through social media responses.
The legacy image of the revenue officer or taxman is gradually shifting from being intimidatingly adversarial to being a persuasive guide and facilitator.
Initial data streaming indicated widespread adoption of GST by trade and industry. New registrations approved in GST crossed a million before the end of the initial month, and about two lakh applications were in process. GST has impacted the transport and logistics sector: movement of trucks has increased; time required to cover distances has come down drastically, and pollution levels have come down with increased truck speeds.
However, to reap the advantages of GST, concerns of business enterprises and industry sectors would need to be addressed. To name a few, the healthcare industry has sought that services be zero-rated rather than exempt so that providers can avail of input tax credit; hybrid vehicle manufacturers ask for 28% without cess; power distribution projects under various government programmes, earlier quoted inclusive of taxes as applicable then, are now subject to higher costs, and so these should be brought aligned to previous rates; and urgent intervention of the GST Council is requested towards huge losses to be suffered by units located in the exemption areas on account of non-availability of credit of excise duty which is inbuilt in the manufacturing cost of the opening stock of goods in the GST regime.
Indian industry is hopeful that the Centre will look into the problems flagged by different sectors of industry and work to quickly resolve the same, ironing out interpretational issues.
More important and imperative, even as we celebrate 70 years of Independence, is to leverage GST to effect ‘social reformation’, a transformation that would usher in greater transparency of supply chain, inclusiveness of MSMEs in business, wider dispersed development, accelerated employment and affordable quality living for economically weaker sections of the population.
(The author is chairman, Economic Affairs & GST Sub-Committee, CII Southern Region)
This is the first instalment of a six-part series on GST implementation but across industries. The series has been facilitated by the Confederation of Indian Industry
