Unifying force. Goods and Services Tax – A game changer

As we celebrate six years of the GST roll out on July 1, 2023, we can see a new high of this tax reform wherein revenue collection of ₹1.5-lakh crore every month is a new normal. The Prime Minister has extolled the new tax regime as a game changer for the economy as tax collection is rising despite lower tax rates, which is a reflection of improved compliance and integration.

GST was born out of subsuming of 17 taxes and 13 cesses levied by the Central and State governments and by conferring equal power on Centre and States to levy tax on supply of goods and services.

At the time of GST’s implementation, there was optimism as well as some trepidation regarding the new tax reform’s impact on the economy. On conclusion of 6th year, the clouds of uncertainty have been dispersed by the GST sunshine.

The number of taxpayers registered in GST has more than doubled from 67.83 lakh in July, 2017 to 1.40 crore, as on June 25, 2023. There is a continuous surge in revenue from a monthly average of ₹89,885 crore in financial year 2017-18 to ₹1,50,504 crore in the financial year 2022-23. In FY24, the average monthly revenue so far has been ₹1,72,063 crore.

A recent survey by a leading consulting firm has revealed that GST has matured and 94 per cent of the respondents across industries feel positive about GST.

Towards uniformity

The biggest transformative force under GST was a unified taxpayer base governed by a uniform set of laws and procedures; common management of business records and filing returns; an uninterrupted input tax credit chain through the mechanism of Integrated Goods and Services tax (IGST); completely automated and faceless administration with all processes being online.

An efficient system of e-way bill has consigned border check posts to the pages of history and has helped to create a unified market across the country. This has led to substantial increase in inter-State trade. A working paper published by the Economic Advisory Council to the Prime Minister (EAC-PM) shows that over the last five years, the Value of Goods Transported Inter-State (Domestic Only) increased by 44 per cent and the Cumulative Value of Imports and Domestic Goods increased by 34 per cent.

In many ways, this is indicative of the transportation efficiency gains that have accrued after the introduction of GST as well as the enhanced economic integration of the States.

The technological advancement in GST continues. E-invoicing today covers a taxpayer base which contributes more than 80 per cent of GST revenue. This has simplified processes of return filing and e-way bill generation through auto population. The accounting software have made return filing simple and have also helped the taxpayers to assess and improve their logistical and accounting efficiencies.

Trust and partnership

The new tax system was designed with trust and partnership with the trade as cornerstone. Though this has been reciprocated by a large section of the taxpayers, there are a set of rogue players in the market who have used the simplified process of registration to create bogus firms and pass on huge amounts of fake credit in the GST ecosystem.

This not only causes revenue loss but also adversely affects the competitiveness of honest taxpayers. Currently a nationwide crackdown on fake invoicing is under way through a two-month programme of verification of suspected fake registrations by the Central and State tax administrations.

Data analytics has played a big role in targeting such suspect registrants numbering around 45,000. By now total GST evasion amounting to more than ₹13,900 crore has been detected during the drive and fraudulent input tax credit of more than ₹1,430 crore has been blocked.

Curbing rogue players

Going forward, the tax administrations of the Centre and the States have joined hands to see how such rogue operators can be controlled. It is proposed to use more third party data for online, real time verification of supporting documents submitted at the time of registration like proof of address, bank account details, etc. The risk parameters for the new applicants for registration under GST is being continuously refined to catch them at the threshold itself.

The rogue players who still manage to cross this threshold are likely to face certain restrictions in their ability to upload invoices, amend the figures of auto populated tax liability and input tax credit in their returns, and would be targeted more pro-actively by the enforcement and audit wings of the administration, through use of data analytics and Artificial Intelligence.

GST is a modern taxation system aspiring to meet the needs of a resurgent India. The tax administrators have a duty to continuously balance the needs of trade facilitation and enforcement measures. Continuous enhancement of use of technology, big data analytics and use of artificial intelligence is key to achieving this balance.

The writer is Member, CBIC. Views expressed are personal

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