GST Impact: Compliance Simplified, Tax Revenues Boosted, Challenges Persist

editor — Tue, 02 Jul 2024 05:24:49 +0000

Introduced seven years ago, the Goods and Services Tax (GST) has simplified compliance, improved tax buoyancy, and increased states’ revenues. However, fake invoices and fraudulent registrations remain significant challenges for policymakers trying to curb tax evasion.

Rolled out on July 1, 2017, GST streamlined 17 taxes and 13 cesses into a 5-tier structure, significantly simplifying the tax regime.

What changes did GST bring about?

Higher Turnover Thresholds: The turnover threshold for registration increased to ₹40 lakh for goods and ₹20 lakh for services, up from an average of ₹5 lakh under VAT.
Reduced Submissions: GST reduced 495 different submissions (challan, forms, declarations, etc.) across states to just 12.
Growth in Registered Taxpayers: The number of registered taxpayers has risen to 1.46 crore from 65 lakh in 2017.
Increased Monthly Revenues: Average monthly GST revenues soared from around ₹90,000 crore in 2017-18 to about ₹1.90 lakh crore in 2024-25.

According to government data, GST has improved tax buoyancy from 0.72 (pre-GST) to 1.22 (2018-23). Despite the end of compensation, state revenues remain buoyant at 1.15.

Without GST, states’ revenue from subsumed taxes from fiscal 2018-19 to 2023-24 would have been ₹37.5 lakh crore. With GST, states’ actual revenue amounted to ₹46.56 lakh crore.

How has GST affected prices of common items?

The effective weighted average GST rate has consistently fallen since 2017, and GST has lowered taxes on many essential items compared to pre-GST rates.

Tax Reductions on Common Items: Hair oil and soaps saw a tax cut from 28% to 18%. Tax on electrical appliances was lowered to 12% from 31.5%.
Exemptions for Essential Items and Services: GST has exempted many essential items and services, such as unbranded food items, certain life-saving drugs, healthcare, education, public transport, sanitary napkins, hearing aid parts, and agricultural services.

Challenges and Measures

As evaders find new ways to defraud the exchequer, tax officers have been grappling with the generation of fake invoices and fraudulent GST registrations.

In 2023, the Directorate of GST Intelligence (DGGI) detected tax evasion of more than ₹1.98 lakh crore and arrested 140 masterminds involved in defrauding the exchequer. Significant GST evasion was detected in diverse sectors like online gaming, casinos, insurance, and secondment (import of manpower services).

The establishment of the GST appellate tribunal is expected to streamline and fast-track the dispute resolution process for the industry. However, the principal bench and the state benches of the GSTAT are yet to be operationalized.

The Institute of Chartered Accountants of India (ICAI) President stated, “Our efforts in capacity building, including training over 6,800 officials across various government departments, have been pivotal in promoting an efficient and transparent indirect tax regime.”

Source: Hindustan Times

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GST Impact: Compliance Simplified, Tax Revenues Boosted, Challenges Persist

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