GST 5 years: The journey of indirect tax regime so far
Highlights
- GST drastically altered India's tax administration and compliance
- GST regime made it easier to do business by doing away with multiple taxes
- Centre and states come together in GST Council to discuss modalities for smooth functioning of GST
GST 5 years: The Goods and Services Tax (GST), which completely redesigned the nation's indirect tax system and drastically altered tax administration and compliance, was rolled out at the stroke of midnight on July 1, 2017, marking the country's biggest reform in the indirect tax system in half a decade.
The government has issued a series of notices, circulars, explanations and regulations over the last five years of the GST. The government has streamlined the essential procedures in response to stakeholder concerns in order to prevent needless litigation backlogs and never-ending disputes.
GST touted to be India's most comprehensive tax reform in decades, is based on the principle of 'one nation, one market, one tax'. It subsumed 17 local levies like excise duty, service tax and VAT and 13 cesses. But under the current GST regime, there are four-rate structures -- a low rate of tax of 5 per cent on essential items and a top rate of 28 per cent on cars is levied. The other slabs of tax are 12 and 18 per cent. Besides, there is a special 3 per cent rate for gold, jewellery and precious stones and 1.5 per cent on cut and polished diamonds.
Besides, a cess is levied on the highest tax slab of 28 per cent on luxury and demerit goods. The collection from the cess goes to a separate corpus 'compensation fund' which is used to make up for revenue loss suffered by the state due to the GST rollout. When GST was rolled out, states were promised compensation, from the cess fund, for five years if their GST collection falls short of the 14 per cent compounded revenue growth. Most states have sought an extension to the compensation mechanism and a final decision is likely to be taken at the next GST Council meeting in Madurai in the first week of August.
Also Read | GST Council meet: All eyes on states' compensation; 28% tax on online gaming, casinos, horse racing
The tax base has significantly increased since July 1, 2017. As of March 31, 2022, there are 1.36 crore active GST registrations in the country. As per the data, GST revenues in May 2022 reached Rs 1.41 lakh crore, representing an increase of 44 % from the previous year and also the fourth time to breach the Rs 1.40 lakh crore mark.
Rajiv Kumar Aggarwal, founder & CEO, StoreHippo, said that the GST regime brought a paradigm shift. "It has made it easier to do business by doing away with multiple taxes and making it simple for small and large businesses to buy/sell products or services pan-India. GST has also been a facilitator of competitive pricing as more sellers are available to businesses."
Abhay Grover, Asst. Professor, Finance and Management, Mittal School of Business, Lovely Professional University, said that the GST represents an unprecedented exercise in fiscal federalism. The Centre and states come together in the GST Council to discuss modalities for the smooth functioning of GST.
The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state counterparts, has met 47 times so far and has taken measures which made Rs 1 lakh crore GST collection per month 'a new normal'.
Reggie Raghav Jerath, founder & CEO, Gather Network, said, that the new tax regime has benefited both the Indian economy as a whole and small and medium-sized enterprises (SMEs), adding that the market's unification will increase competition among SMEs.
The GST regime in the last 5 years has moved forward with alacrity but it is still a long way to go to achieve its full potential of GST. With petrol, diesel, ATF outside GST, a large part of the economy is still not covered by the new tax regime.
Also Read | GST Council meet: No decision on extending compensation regime to states
