5 years of GST: What are the challenges ahead?

The Goods and Services Tax (‘GST’) was implemented in the year 2017 with the objective to ease doing business in India and mitigate the cascading effect and litigations from the taxation system.

In terms of achievement, undoubtedly, GST is the most significant and revolutionary indirect tax reform that India has witnessed post-independence. The landmark legislation has subsumed a plethora of indirect taxes and has been successful in implementing a single tax regime. In terms of simplification and digitization, it is commendable how GST has revamped the traditional approach of manual intervention and complicated compliances to system-driven structured compliances.

The efforts put in by the government and GST Council are laudable with the continuous evolving of the law to make it simple and taxpayer-friendly. With the implementation of GST, various legacy issues such as cascading effect, multifold compliances and related complexities have been mitigated to a great extent. E-invoicing and E-way bills can be termed as the momentous outcome of the new legislation.

With a federal structure and many political hindrances, it is imperative that like any other new legislation, even GST will require time to settle down. Even though the era of multiple taxes and related litigations has been reduced to a great extent, it is to be admitted that the challenges still persist which need to be resolved gradually to make GST successful in the true sense and to achieve the aim of making GST “one nation one tax”. The frequent changes in law, contrary advance rulings, no seamless ITC and absence of an appellate forum can be seen as significant slips which need to be resolved on priority. In terms of bringing in certainty and reducing disputes, it can be termed as a work in progress.

For any system to thrive, a robust dispute resolution mechanism is a must. However, in recent past, the country has witnessed so many contrary advance rulings on the similar issue, thereby creating confusion and chaos amongst the taxpayers. Hence, it is absolutely necessary that a centralised authority for advance rulings is notified on utmost priority to address the issues relating to contrary advance rulings between the states. Besides, absence of GST Tribunals can be regarded as a major setback for the system. “Justice delayed is justice denied” applies perfectly in the current GST scenario. Hence, the focus should be on a time bound and robust dispute resolution mechanism.

Besides, rationalisation of the GST rates, seamless flow of input tax credit for businesses with minimum blockages, clarity on issues surrounding intermediary services, clarity on taxability of virtual digital assets / cryptocurrencies should on priority list of the government. In the long run, there should be one or two GST slab rates, with a simple and clear law, and a time bound dispute resolution mechanism.

At this juncture, it is imperative that items like petroleum products and alcohol for human consumption is included in GST. However, it being a major source of revenue for the State governments, a larger political consensus needs to be built in to bring these items under the GST fold. In the long run, all the goods and services should be part of the GST regime to make it fully effective and for the nation to obtain its true benefit.

In order to achieve ease of doing business, it is imperative that the compliances are kept to minimal to reduce the burden of the taxpayers aligned with simplified laws and procedures and a well structed administration.

The teething problems under GST should be considered as the inception of process to achieve a success. It is a positive step towards shifting to a formal economy. However, it is commendable to see a flexible and supportive approach from the government. Overall, it’s been a good success from nation’s perspective, with continuing issues that need to be addressed in the journey ahead. The government has showcased their positive intent to bring reforms to remove the anomalies and we are hopeful that GST law will attain maturity in times to come.

This article was originally published on ET NOW.