The Goods and Services Tax (GST) system settled down reasonably well in 2018, with revenue collections stabilising, compliance increasing on account of various anti-evasion measures undertaken by the Centre, and rates being rationalised, according to tax specialists.
“We entered the year when GST was six months old and the initial euphoria had tapered down and the benefits that it offered were seemingly pale in the wake of initial compliance-related challenges,” said Pratik Jain, partner and leader, indirect tax, PwC India. “As the year progressed, the GST Council continued [with] its frequent meetings and came up with several measures to simplify the system, including addressing the problems being faced by SMEs and exporters.”
GST rates cut
Over the year, the GST Council had reduced rates on about 100 items. By the end of the year, only 30 items remained in the 28% tax slab and most of these were either sin goods such as cigarettes or luxury items such as automobiles. Only one common use item — cement — remained in the top bracket. The GST Council said it would take a call on cement once the revenues exhibit stronger growth.“GST collections and compliance have improved,” said Abhishek A Rastogi, partner, Khaitan & Co.
“The e-way bill system will further improve compliance. Now, with collections going up, the government has realised that it can go ahead with rate reductions and so, it has done that. More importantly, what it needs to do is to cut down the number of GST rate slabs.”
GST collections have indeed improved this year compared with last year, but have still not consistently crossed the ₹1 lakh-crore mark. While the average monthly revenue in financial year 2017-18 was ₹89,885 crore, the average revenue in the current year, so far, has been ₹97,040 crore. Revenues crossed ₹1 lakh crore twice in the year, in April and October.
“Tax collections during the year, though a tad higher than the first six months, were not as buoyant which resulted in the tightening of administration and more frequent notices/investigations,” Mr. Jain added. “Implementation of e-waybill system from April 1, 2018 was also a move expected to check tax leakage, though the impact of this is still not as visible as the government would have hoped for.”
Further, there are still pain points in the GST set-up, most notably the Advance Ruling Authority (ARA) framework, analysts say. The fact that these authorities have government officials as members has meant that an overwhelming number of decisions are in favour of the Revenue Department, So fewer companies are approaching ARAs.
Another issue is that various State-level ARAs often deliver contradictory judgments that confuse industry.
“The good thing... is that in the last GST Council meeting, they announced that they would set up a centralised ARA that would take a decision in situations where there are contradictory rulings by State ARAs,” Mr. Rastogi said. “But more than this, there needs to be representation from government and non-government [sides] on the ARAs.”
The overall view is that 2019 is expected to be a year of consolidation in GST with the lower frequency of changes will be lower and the focus will be on increasing compliance.
