7 Years of GST: Balancing Tech & Transformation
Kartavya Desk Staff
#### Syllabus: Indian Economy: Taxation
#### Source: BS
Context: After 7 years , the Goods and Services Tax (GST) has proven to be a game-changer for India’s digital economy. This tech-driven tax system has facilitated automation for both the government and businesses, moving towards the vision of “one nation, one tax.”
About Goods and Services Tax (GST):
• It is an indirect tax (not directly paid by customers to the government) that came into effect on July 1, 2017, as a result of the 101st Amendment to the Indian Constitution.
• It is imposed on both manufacturers and sellers of goods, as well as suppliers of services.
• For tax collection, it is divided into five tax slabs – 0%, 5%, 12%, 18%, and 28%.
About GST Council:
• It is an apex committee to modifies, reconciles or makes recommendations to the Union and the States on GST, like the goods and services that may be subjected to or exempted from GST, model GST laws, etc.
• Article 279A of the Indian Constitution empowers the President of India to constitute a joint forum of the Centre and States called the GST Council.
Need for GST:
• The inclusion of several indirect taxes at various levels of the supply chain hampered the Indian tax system.
• This resulted in a complicated and fragmented tax framework that included excise duty, service tax, VAT, central sales tax (CST), and other taxes.
• These led to tax cascading (tax on tax), raising the entire tax burden on goods and services.
• Hence, the primary goal of GST is – To simplify the tax system by substituting a single indirect tax for several indirect levies Eliminating tax cascading by establishing a uniform tax structure
• To simplify the tax system by substituting a single indirect tax for several indirect levies
• Eliminating tax cascading by establishing a uniform tax structure
Achievements of GST:
• Revenue collection: The Gross Goods and Services Tax (GST) collections hit a record high in April 2024 at Rs 2.10 lakh crore.
• The Gross Goods and Services Tax (GST) collections hit a record high in April 2024 at Rs 2.10 lakh crore.
• A seamless market and digitised compliance:
• Digital Infrastructure: The GST Network (GSTN) streamlined registration, tax payments, and return filing for taxpayers. Enhanced Compliance: GSTN’s data analytics and automation (e.g., e-waybills, e-invoicing) improved compliance and tax evasion prevention.
• Digital Infrastructure: The GST Network (GSTN) streamlined registration, tax payments, and return filing for taxpayers.
• Enhanced Compliance: GSTN’s data analytics and automation (e.g., e-waybills, e-invoicing) improved compliance and tax evasion prevention.
• Benefits for MSMEs:
• A simplified system with measures like quarterly returns and relaxed GSTR-9C requirements increased MSME registrations. Improved access to credit accelerated MSME growth.
• A simplified system with measures like quarterly returns and relaxed GSTR-9C requirements increased MSME registrations.
• Improved access to credit accelerated MSME growth.
• Unified Market and Competitiveness:
• Established a common market and eliminated tax cascading, boosting domestic and global competitiveness. Removed entry taxes and checkpoints, ensuring smooth movement of goods, faster transit times, and reduced logistics costs.
• Established a common market and eliminated tax cascading, boosting domestic and global competitiveness.
• Removed entry taxes and checkpoints, ensuring smooth movement of goods, faster transit times, and reduced logistics costs.
Challenges still persisting:
• Complexities in return forms and the ambiguity surrounding tax rates and classifications of certain goods and services lead to disputes and uncertainty.
• Combating tax fraud remained a priority, with measures in place to ensure compliance and weed out fraudulent businesses.
Some areas that deserve attention are:
• Commence taxation of petroleum crude, high-speed diesel, petrol, natural gas and aviation turbine fuel and similarly, alcohol meant for human consumption;
• Inclusion of other levies such as electricity duty, stamp duty, etc;
• Clarifying taxation of online gaming activities, transactions involving cryptocurrency, etc.
• The officials should also look into rationalisation of the tax rates (slabs); upgrading the law to deal with a digital world and keep up with the various technological developments.
Conclusion:
• The implementation of GST has definitely been a success but is still a new reform with the potential to witness phenomenal growth and harmonisation in the coming years.
• GST has shown immense promise, reshaping the economy and driving digitization while also confronting challenges and fraud.
Insta Links:
Five years stronger
Mains Links:
Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions? (UPSC 2020)
Prelims Links: (UPSC 2017)
What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?
• It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
• It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
• It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
• 2 and 3 only
• 1 and 3 only
• 1, 2 and 3
Ans: 1