In his budget speech from 2006 -- 07, Minister P Chidambaram had proposed a move towards the Goods and Services Tax or regime. The next decade was spent in thrashing out its final contours, and mustering courage to usher in the reform of indirect taxation.
Prime Minister Narendra Modi finally rolled out on the midnight of July 1st, 2017 amid 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%. 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.
Partner Shardul Amarchand Mangaldas, Rajat Bose, said 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. Processes that GST intelligence officers follow should be outlined.
The GST system is yet to stabilise after five years because of the rate structure and constant tweaks. It still suffers from bottlenecks.
At the same time, the 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 because of the GST implementation.
As a former Chief Statistician of India, Pronab Sen said that GST has worked out reasonably well. There were many glitches, but they are not unusual. There will be political issues on GST as the government changes in states.
The tax system should be simplified to make it easier for businesses to do business, according to businesses. 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 to be able to unlock working capital, EoDB and ITC restrictions.
There is still a long way to go before GST can become a good and simple tax as anticipated, and the government has been proactive in addressing any major pain points. The Centre and states that need higher revenues and less slabs will mean a simplified tax regime, which will be the immediate priority of the government.