What have been the most notable hits and misses of GST in five years?

In his budget speech of 2006-07, the then Finance Minister P Chidambaram had floated the idea of moving towards the Goods and Services Tax or GST regime. And the next decade was spent in thrashing out its final contours, and mustering the courage to usher in the reform in indirect taxation. 

Amid much fanfare, the GST was finally rolled out on the midnight of first of July, 2017 by Prime Minister Narendra Modi. The nationwide reform subsumed 17 large taxes and 13 cesses. And after initial hiccups and tepid collection, the GST revenue has picked up pace over the last two years. 

The average monthly gross GST collection for the first quarter of FY23 has been ₹1.51 lakh crore against ₹1.1 lakh crore in the first quarter of the last fiscal-- showing an increase of 37%. Economic recovery from the pandemic, high inflation, anti-evasion measures especially against fake billers and gradual improvement in compliance have helped.

But as Business Standard’s AK Bhattacharya pointed out, the total GST collections in FY22 were about 6.26% of GDP compared to 6.22% in FY19 -- which was both a pre-Covid year and the first full year after the new tax was rolled out. The growth is nowhere near what was expected.

Rajat Bose, Partner, Shardul Amarchand Mangaldas says GST fulfilled basic objectives it set out to achieve. Petroleum products should be brought under GST. He says, GST appellate tribunal should be set up as soon as possible. Process that GST intelligence officers follow should be outlined.

A common complaint is also that the GST system is yet to stabilise even after five years because of the rate structure and constant tweaks. It still suffers from bottlenecks.  

But, at the same time, GST is said to be one of the finest examples of cooperative federalism as the Centre and states come together in the GST Council, and almost all decisions are taken with consensus in the larger interest of the country and its people. But some states are unhappy as they stare at a stoppage of compensation for revenue loss from the cess fund due to GST implementation.

Pronab Sen, Former Chief Statistician of India, says so far, GST has worked out reasonably well. There were many glitches, but they are not unusual. Political issues on GST will continue as government change in states.

Businesses say the government should work further on simplifying the tax system to boost the ease of doing business. Taxpayers have struggled with the demands of GST compliance and return filing although this burden has been progressively reduced.

Mahesh Jaising, Partner and National Indirect Tax Leader, Deloitte India says, industry has welcomed GST’s technology platform. Govt has been taking a consultative approach with GST, he says. Industry expects measures on unlocking working capital, EoDB and ITC restrictions. 

The government has been proactive in addressing any major pain points, but there is still a long way to go before GST can achieve its full potential and become a truly ‘good and simple tax’ as envisaged. Meanwhile, the immediate priority of the government will be tax rate rationalisation as the Centre and states need higher revenues and lesser slabs would mean a simplified tax regime.