Assessing the GST Regime

What is the issue?

With one year of GST in place, a retrospective look at its impact, particularly for industry and services sector, becomes essential.

What was the objective?

• ‘One nation one tax’ was the philosophy and narrative of the government for GST.
• It was also a part of the vision to improve India’s ranking in ‘ease of doing business’.
• GST thus aims at addressing the country’s complex indirect tax framework.

What are the favourable aspects?

• Governments have had an open approach towards GST implementation constraints.
• They have undertaken immediate corrective measure to resolve issues.
• The GST Council has demonstrated a collaborative effort and consensus-based approach.
• The government thus carried out a rate rationalisation exercise.
• This was to reduce rates on about 178 items from 28% to 18%.
• This had a positive effect to an extent, reducing the tax burden.

What are the concerns?

• Rate changes - Given the short time-line, it resulted in several challenges for business.
• As, they had to revise their IT systems overnight.
• Revising pricing labels, revising pricing strategy were the other challenges.
• Besides, some had to deposit huge sums of money due to anti-profiteering for failing to execute required changes in time.
• E-Way Bill - This was one of the major changes on the supply chain and logistics front.
• This was to ensure common documentation for movement of goods across the country.
• But the e-way bill provisions are not uniform across States.
• This has diluted the very objective of a common e-way bill.
• It has created problems for businesses operating with pan-India presence.
• As, they had to set up State-wise e-way bill systems.

• Services Sector - Under the Constitution’s framework, State and Centre collaborate for taxing a particular services transaction.

• Logically, there have been implementation challenges in terms of billing for pan-India contracts, and State-wise credit pools.
• Also, the sector is dealing with challenges around intra entity supplies and input service distribution.
• Compliance - One aspect that affected all the sectors was filing three parts of the monthly return for regular dealers.
• This had to be done with matching of the invoice-level details of the supplier with that of the recipient of supply.
• Government has abandoned its original plan and instead implemented a simplified return without any matching concept.
• This is, however, only on a temporary basis.

What next?

• Next wave of GST is likely to include products that are currently not in the ambit of GST.
• These may include petroleum products, alcohol and real estate.
• Changes are expected to be made to the GST law in the next Parliament session.
• The GST Council has been working on this draft to address some of the key issues.
• The objective of GST to improve the ease of doing business largely depends on further appropriate streamlining of the regime.

Source: BusinessLine