In his budget speech in 2006 -- 07, Minister P Chidambaram had proposed the idea of moving towards the Goods and Services Tax or regime. The next decade was spent in thrashing out its final contours and mustering the courage to bring in the reform of indirect taxation.
The prime minister Narendra Modi finally rolled out the plan on the midnight of July 1st, 2017 after much fanfare. The nationwide reform consisted of 17 large taxes and 13 cesses. Revenue has picked up a lot over the last two years after initial hiccups and tepid collection.
The average gross GST collection for the first quarter of FY 23 has been 1.51 lakh crore against 1.1 lakh crore in the first quarter of the last fiscal year, showing an increase of 37%. The economic recovery from the pandemic, high inflation, anti-evasion measures, especially against fake billers, and gradual improvement in compliance have helped.
The total GST collections in FY 22 were 6.26% of GDP compared to 6.22% in FY 19 -- a pre-Covid year and the first full year after the new tax was rolled out, according to Business Standard s AK Bhattacharya. The growth is nowhere near what was expected.
Rajat Bose, Partner, Shardul Amarchand Mangaldas said that GST fulfilled the basic objectives it set out to achieve. Petroleum products should be brought under the GST. He says that the GST appellate tribunal should be set up as soon as possible. The GST intelligence officers are responsible for the process.
A common complaint is that the GST system isn't stable after five years because of the rate structure and constant tweaks. It still suffers from bottlenecks.
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. Some states are unhappy with the stoppage of compensation for revenue loss from the cess fund due to the GST implementation.
Pronab Sen, former Chief Statistician of India, says GST has worked out well so far. There were many glitches, but they are not unusual. As changes occur in states, there will be political issues on GST.
Businesses say that the government needs to work on simplifying the tax system to make it easier to do business. Taxpayers have struggled with the demands of GST compliance and return filing even though this burden has been reduced.
Mahesh Jaising, partner and National Indirect Tax Leader, Deloitte India says industry has welcomed the technology platform of GST. Govt is taking a consultative approach to GST, he says. Industry expects measures on unlocking working capital, EoDB and ITC restrictions.
There is still a long way to go before GST can become a good and simple tax as envisaged, and the government has been proactive in addressing any major pain points. The Centre and states need higher revenues and less slabs, which will mean a simplified tax regime, which is the immediate priority of the government.