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Journey of GST in India and what we can expect in future

It has been four years since Goods and Services Tax (GST) unified most of the indirect tax laws in India.

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By CNBCTV18.com Contributor July 13, 2021, 1:21:12 PM IST (Published)

Journey of GST in India and what we can expect in future
It has been four years since Goods and Services Tax (GST) unified most of the indirect tax laws in India. It took over taxes such as Service Tax, Central Excise and Value Added Tax (VAT) which used to be levied on supplies depending on the type of activity being carried out. It became a comprehensive tax, with a multi-stage levy and destination-based depending on the place of consumption.


With ‘One nation, one tax’ as the ideology, the goal of GST was to streamline the indirect tax system in India. India had way too many indirect tax laws, which translated into a multitude of different portals, returns and due dates to keep track of. The lack of a unified system also made nationwide surveillance difficult and enhanced loopholes for unscrupulous businesspersons who looked for them.

It took 17 years from the time the first committee was set up in 2000 to draft the GST law to its launch in 2017. However, the journey did not conclude with the incorporation of this massive, unified reform. In fact, it was the beginning of an evolution in modern tax compliance. The advantage of having a common tax law unifying the entire country set the path for new digital reforms.

2018 saw the launch of e-way bills, which was introduced to track the movement of goods across the country, and indirectly a means to check tax evasion. 2019 saw tougher GST laws come in, restricting tax credit claims to data reported by the respective vendors only. 2020 saw India’s biggest digital reform in the form of e-invoicing. This was a system of interoperable electronic invoices generated by taxpayers but authenticated by the government through the e-invoice portal.

2021 was kickstarted with more updates in the GST law. ITC claim restrictions became even stricter, much to taxpayers’ dismay. On the other hand, small taxpayers experienced some relief in the form of new quarterly filing options.

In the past four years, the journey of GST has seen advantages and drawbacks. The advantages have been many. The introduction of GST helped remove the cascading effect of taxes and contributed to the seamless flow of tax credits. The higher threshold limits for registration give taxpayers a bigger leeway as compared to the previous indirect tax laws.

Further, GST has helped regulate the unorganised sector in India. The construction industry, for example, was highly unorganised. A large portion of the dealings took place in cash and was unaccounted for. Now, due to stringent input tax credit rules and one common law, it is easier to track and penalise defaulters. GST has, overall, helped regulate this sector and many more and has certainly pushed for businesses to bring clandestine transactions under the government’s radar.

If the newer stringent tax law didn’t do the trick enough, e-invoicing has further assisted the government in bringing all transactions under digital scrutiny. At present, it is in place for businesses with a turnover of more than Rs.50 crore and for B2B transactions only. But, there is a chance that it will be extended to all businesses and all transactions someday.

The GST journey is constantly evolving. A lot has come about in the past four years. It started off as a ‘Good and simple tax’, a merger of various laws into one, and a simplification of the compliance system. But now, it has grown in leaps and bounds with new reforms which leverage digitisation and the surge of stricter rules and compliances.

GST is still very much a work-in-progress reform. If one had to ask the question of what can taxpayers expect in the future with regard to GST, the answer would not be so simple. When it comes to the government, they are going ‘digital’ at an unprecedented rate. Registrations, return filings, refunds, etc., were already carried out fully online. Now, with the possibility of e-invoicing being mandated for all businesses, India will move to a trackable, traceable system of transacting, with no scope for loopholes.

The next biggest thing to expect in the future of GST is the unification of systems. Soon, there may not exist different systems for GST return filing, e-invoicing and e-way bill generation. Instead, a single upload of data and seamless data flows will give rise to just one consolidated data portal. This move will reduce taxpayers’ data entry efforts to a bare minimum and also help the government keep tabs on revenue transactions more effectively.

The third biggest move could come in the form of integration of direct and indirect tax systems in India. Up until now, there was hardly any linkage between taxpayer data reported in their income tax returns and the data reported in the GST returns. This is bound to change soon.
The government had announced in 2020 that taxpayers’ turnovers reported under GST would be available on the income tax portal. Currently, there are thousands of businesses involved in fake invoice scams or who report crores of rupees under GST but do not pay income tax.

All of this will change once the government facilitates data-linking between the income tax and GST portals. It will become much more difficult for taxpayers to play in the fake invoice game or to even think about tax evasion. This move would also increase taxes for the exchequer and put a hard stop to underreporting of revenue data.

How do taxpayers keep up? To keep up with the constantly evolving reform that is GST, taxpayers should make digitisation a deliberate choice now. If the government is using data analytics and artificial intelligence (AI) to track even the smallest seepage in revenue, it is high time that taxpayers did the same, too, to prevent it.

Several taxpayers have missed out on claiming accurate input tax credits in the past due to delayed filings by their non-compliant vendors. The onus of improving their compliance game is on the taxpayer, and what better way to do it than to leverage technology and bring in automation. Putting taxpayers’ GST journey on autopilot mode from return filing to reconciliations to ITC claims and vendor management is the absolute need of the hour. It is also the only way that taxpayers can keep up with GST law enforcement in the future.

Last but not least, what taxpayers are really expecting in the future of the GST journey is a stable system. A system that is free of technical glitches, has simpler compliances and fewer tax slabs. Four years down the line and tens of GST Council meetings later, if the Centre and the states can work together in finding a solution to these issues, it would truly be the icing on the cake. It was introduced as a ‘Good and simple tax’ after all.

The author, Archit Gupta, is Founder and CEO at Clear. The views expressed are personal
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