Eventful journey

Four years after its inception, the Goods and Services Tax (GST) remains an unsettled work of reform, not least due to the prolonged economic crisis since then. On the positive side, it has got rid of the cornucopia of rates across States that posed huge obstacles to businesses. It is a different matter though that with six-seven slabs in existence, rates can be streamlined further. But it is in the ongoing formalisation of the economy that GST is turning out to be a watershed. With over a crore registered GST entities, it accounts for about 13-16 per cent of medium, small and micro enterprises in the country. Real-time integration of GST data with income tax and banking records will help prevent leakages and widen the tax base. In that event, it should be possible to move towards lower and fewer rates. Improved compliance is borne out by the fact that monthly collections have crossed the ₹1 lakh crore mark almost on a trend basis despite adverse economic conditions.

On the positive side, the fitment panel of the GST Council has been responsive to stakeholder grievances. Compliance has improved with the introduction of e-invoicing in October last year. This has helped in the easy generation of e-way bills, ensuring transparent and smoother movement of goods. With goods being tracked on a real-time basis and the limited shelf-life of the e-way bill, the scope for fraud stands visibly reduced. Meanwhile, e-invoicing has reduced the possibility of fake transactions to fraudulently claim input tax credit. For a country that is not known for tax compliance, GST is turning out to be a game-changer.

However, it is ironic that GST stands at a crossroads today, thanks to rising mistrust between the Centre and States over the issue of compensation cess. The 14 per cent increase in States' revenue over the transition period, built into the statute, no longer seems workable in the context of the pandemic. Anyway, the cess period ends in a year’s time and the Council needs to address demands for an extension. An amicable solution needs to be arrived at. It is troubling that GST tribunals are yet to come into being to resolve disputes. High Courts can only decide on points of law; some significant sections of the CGST law are up for review. One includes the legality of Section 16 (2) which holds up a buyer’s input tax credit if the seller has not paid GST. The courts, the Gujarat High Court in particular, have been critical of the excesses committed under Sections 69 and 132, which accord sweeping powers to arrest those guilty of error. For a measure that is meant to ease the conduct of business, this is not the right way forward. The move to make GST return filing quarterly for small units has not worked well for them, as they have to deal with large units which have to file monthly returns. With e-invoicing falling in place, quarterly filing can perhaps be made uniform. It would be a pity if glitches become stumbling blocks in realising GST's true potential.

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