6 years of GST: India’s tax reform that revolutionised the economic Prospect

India woke up to an alteration in its tax landscape on July 1st, 2017 as the Goods and Services Tax (GST) took center stage, promising to be the answer to demands for a streamlined indirect taxation system for the entire country. It’s motto being “One nation, One market, One tax,” GST aimed to bring benefits for all stakeholders, governments, taxpayers, and administrators.

GST’s introduction marked a significant milestone in the history of taxation in India. The introduction of this comprehensive system was particularly remarkable in a diverse and federal country like India where multiple tax laws were consolidated into a single system.

The implementation of GST was no smaller achievement. The Central government and 29 states collaborated to create a dual GST mode. Despite doubts about its successful execution, the tax base has actually more than doubled from 2017, with substantial growth in the revenues.

The taxpayer base has witnessed an extraordinary surge, from 63.9 lakh in 2017 to approximately 1.40 crore in 2023. Initially in 2017, the monthly average remained at ₹89,885 crore, but April 2022 recorded ₹1.50 lakh crore, reaching ₹1.87 lakh crore in April 2023.

When compared with the size of the Income-tax, it is clear that there is a scope for many more businesses and companies to enroll for GST as Central Board of Indirect Taxes and Customs Chairman Vivek Johri and Additional Commissioner Amaresh Kumar wrote in an article for ET.

“Given the benefits GST promises to deliver — primarily through the integration of medium and small businesses with more extensive supply chains, including ecommerce platforms — it is surprising that so many have chosen to remain outside. Businesses in retail trade, construction and real estate, and some service segments are more prone to voluntary exclusion,” they said.

GST laid the foundation for a smooth national market, reshaping India’s tax landscape and driving economic growth. By digital processes in registration and return filing, the GST portal ensured smoother compliance for businesses, raising a tech-enabled environment. GST paved the way for other important indirect tax reforms, including e-way bills and e-invoicing, promoting transparent data sharing between businesses and the government of India.

Following the revival of businesses from the impact of COVID-19, the GST treasury has experienced incredible growth, surpassing pre-pandemic collections by a notable margin.

This surge can be attributed, in large part, to the economic boom in India’s GDP during the post-COVID phase and the sustained momentum of the “Make in India” initiative over the years.

However, challenges persisted, such as complexities in return forms and the ambiguity surrounding tax rates and classifications of certain goods and services, leading to disputes and uncertainty.

Additionally, combating tax fraud remained a priority, with measures in place to ensure compliance and weed out fraudulent businesses.

Every month, there are cases of tax fraud reported amounting to thousands of crores of rupees. The exchequer is trying its best to put an end to this menace by increasing the stringency of compliance measures, especially surrounding input tax credit claims. This has created hardships for the honest taxpayer, Gupta said.

The recent drive to detect fake GST registrations brought over 10,000 businesses under the radar, Gupta said, adding the government is on a mission to find even more and suspend/cancel their registrations to ensure that only compliant businesses remain. The government has also initiated automated return scrutiny in full swing.

The new measure could increase the chances of returns being picked up for scrutiny over data mismatches, and taxpayers must be ever more vigilant to ensure 100% accuracy in their compliance, Clear’s founder said. “The implementation of GST has definitely been a success for multiple different reasons as seen above, but that being said, it’s still a new reform with the potential to witness phenomenal growth and harmonisation in the coming years,” he added.

As India embraces the transformative power of GST, it sets the stage for further harmony and prosperity. Experts believe that GST has shown immense promise, reshaping the economy and driving digitization while also confronting challenges and fraud.

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