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‘One nation one tax’ was the philosophy and narrative of the government while driving transformational change in India’s indirect tax space with the introduction of the Goods and Services Tax (GST). It was part of the government’s vision to improve India’s ranking in ‘ease of doing business’ and address the country’s complex indirect tax framework.
With the first anniversary of GST around the corner, it would only be fit to recapitulate the highs and lows of the year gone by.
In the past one year, there have been 27 GST Council meetings, 13 sectoral FAQs and over 150 Notifications issued at the Central level. While one can argue that GST was implemented in a hurried manner, a more pragmatic view would be that the governments (Central and States) have had an open approach towards the difficulties faced by people and undertook immediate corrective measure to resolve issues.
The entire operation of the GST Council has demonstrated a collaborative effort and consensus-based approach by States and the Centre.
On the GST rate front, against the backdrop of increasing GST collections and review of the “GST rate committee” in mid-November 2017, the government carried out a rate rationalisation exercise to reduce rates on about 178 items from 28 per cent to 18 per cent, and for reduction in rates for goods in other categories also.
However, while the change was positive, given the short time-line, the change did result in several challenges for business, as they had to, among other things, revise their IT systems overnight, revise pricing labels, revise pricing strategy and, in certain cases, also deposit huge sums of money due to anti-profiteering for failing to execute required changes in time.
On the supply chain and logistics front, to ensure common documentation for movement of goods across the country, a common e-way bill was envisaged.
Given the magnitude of the change, a well-informed decision was taken to implement e-way provisions in stages. The e-way bill provisions are not uniform across States. This has diluted the objective of a common e-way bill and has created problems for businesses operating with pan-India presence, to set up State-wise e-way bill systems.
Services sector
For the services sector, as expected and against the backdrop of the Constitution’s framework of a State-Central collaboration of taxing a particular services transaction, there have been implementation challenges in terms of billing for pan-India contracts, State-wise credit pools, and intra-entity supply transactions.
The service sector hopes that a single point of administration for large taxpayers be created as a one-stop administrative body similar to the LTU scheme which existed under the excise and income tax regime. The service sector is dealing with challenges around intra entity supplies and input service distribution.
From the compliances front, one aspect that affected all the sectors was filing three parts of the monthly return for regular dealers, with matching of the invoice-level details of the supplier with that of the recipient of supply.
Post an intense internal assessment of various factors, the government abandoned its original plan and instead implemented a simplified return without any matching concept, on a stop-gap basis.
The government is currently evaluating the need to introduce a new simplified return. The industry eagerly awaits the same.
Looking ahead, there would be three key aspects to look forward to:
* Changes to be made to the GST law in the monsoon session of the Parliament as the GST Council has been working on this draft to address some of key issues.
* Providing clarifications and issuance of notifications addressing issues faced by the businesses on an ongoing basis.
* Next wave of GST to likely include products currently not in the ambit of GST, such as petroleum products, alcohol and real estate, thereby mitigating the cascading effect
Overall, implementation of GST in a country like India will never be easy and the Central and State governments have put gigantic efforts in getting GST off the ground. Industry is hopeful that the government continues its efforts to ensure that an ideal indirect tax regime is established.
Jaising is Partner, Deloitte India; Anand is Director and Surana is Manager, Deloitte Touche Tohmatsu India LLP.
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