Is GST Successful? Let's Found Its Pros and Cons

When the Goods and Services Tax (GST) was implemented in 2017, then it was advertised as game changer for the Indian Economy. Since then, it has been five years of GST and in term of achievement, GST is proving a masterstroke wherein plethora of indirect taxes has been implemented in a single tax regime. In these five years, significant changes have been made in GST and many technical glitches have been resolved to make it simple and taxpayer friendly. Since, it has been five years of GST and in future it will pivotal role for the Indian economy, therefore it is absolutely justified to raise the question: “Is GST successful?” This post aims to discuss the pros and cons of GST after five years of its implementation.

The Pros of GST: Impactful and Positive Changes:

In these five years several policies and technical changes have been made in the GST. A few of these are welcome changes altered the face of the tax system. These include:

The Government has launched E-Invoice system in GST on October 2020 to curb tax evasion. According to the new system, companies have turnover of more than 5 billion INR, mandatory to generate E-Invoice for B2B transaction. Under this system, there is very less possibilities of manipulating the invoice, because before any transaction, the invoice gets generated. Besides, through e-invoice higher authorities get information about all the transactions in real-time. In this way, a transparency maintains in the system that greatly minimizes fake GST invoices and tax evasion. At present, all companies with an annual turnover above INR 200 million are under this system and according to the latest information, e-invoicing will be implemented from 1 October 2022 for business entities with an annual turnover above INR 100 million.

On April 2018, the Government has launched e-way bill to simplify and streamline the process of GST compliance. Under this system, the movement of goods can be tracked by issuing electronic document. This document contains E-Way Bill number and other relevant details. Initially, there was some bottleneck in e-way bill but due to the IT support the country has seen a steady rise in the number of e-way bills.

In October 2019, the Government introduced the statutory obligation reconciliation of input tax credit electronically. Under this system, electronically reconcile the input tax credit to be obtained by an assessee with the electronically created records of the GST adherence assumed by the vendor. This system aims to encourage timely compliance by vendors, the same has added to the compliance requirements of the assessee under the GST legislation.

Simplified rate structure is one of the fundamental principles of GST. The Government has made steady effort to rationalize the rates, with the number of goods in the 28% and 5% tax brackets coming down significantly in the last five years.

Also Read: Top Five Advantages of GST Registration for Startups in India

The Cons of GST: The Concern and Consideration

In these five years significant changes have been made in the Goods and Services Tax (GST). But there are some issues that need to be resolved. They include:

GST Network (GSTN) compliance portal should be more sophisticated. The compliance portal has some loopholes thereby it is yet to reach full operating capacity. Due to the loopholes, fraudulent activities and fake invoices are in practice.

India's GST rating system is complicated and has five tax slabs of 0, 5%, 12%, 18%, and 28%. Many nations have implemented GST and they apply one rate for all items. In this context, India's GST rating system need to restructure and much work is required to achieve this goal.

After five years of GST implementation, there is no GST Appellate Tribunal in the country. Today, all cases related to GST are settled in the High Court where already so many cases are pending. The wait for the creation of a statutory appellate tribunal discourages the dispute resolution method. Today, there is a great need of GST Appellate Tribunal where cases related to GST can be settled quickly.

In the context of technology, the end-to-end GST system should be sophisticated and state-of-the-art. This ensures a great transparency in GST registration services and could place GST in India on par with the rest of the world and help to accomplish the bigger goal of ease of doing business.

In these five years numerous changes have made in policy and technical glitches have resolved to make GST successful. After five years of its implementation, multiple taxes and related litigations has been reduced to a great extent, but still there are so many challenges which need to be resolved gradually to make GST successful to achieve the aim of making GST "one nation one tax".

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