It has been a year ago, when India got to know what indirect tax was – yes, we entered the GST era. GST came out with a slogan of ‘one nation, one tax’ and has been quite a path-breaking change, which absorbed many federal as well as state taxes and also created a uniform taxation system in our country. As the cascading was removed, the goods became more reasonable and better-placed in the global market and now credit options are freely available on most products and services, which further remove defects from majority of the supply chains.
GST has opened up a new path of fiscal federalism and in this case the central and state governments exercise the powers to levy a tax all products and services. The good thing is that all decision-making in the GST Council happens by consensus and after a healthy discussion. Introduction of GST has also helped in making India stand at par with other countries in terms of global laws. This makes it easier for any country to do business in India and also increases profit margins and efficiency, therefore, attracting more foreign investments.
However, GST is a still a concept that is work in progress, and for it to be effective in the true sense, the central and state governments have to restructure the law, processes and its compliance. One of biggest challenges is that the GSTN or compliance portal of GST is not up to the mark or its best potential. It is still under automating the returns and is not able to match the invoices from the perspective of credit. Because of this, the government has now proposed to simplify the returns and, from the next year, GST will transition to a single return and the credits would be taken according to the invoice details that are uploaded by the vendor.
The current GST structure is divided five categories or rates for goods and services. These are: 0%, 5%, 12%, 18% and 28%. This needs to be simplified so that the advantages from GST could be maximized. This is also important to bring the Indian tax system at par with the global standards and also get a solution for issues regarding the interpretation and categorization of goods and services, and therefore reduce the chances of disputes. Because of the introduction of GST, the services industry went through a major transformation in its processes and functioning due to the rise in compliance procedures, which came about due to decentralized registrations.
However, the biggest plus point is that the government has taken many proactive and corrective actions like administrative simplifications and also changes in the rates. But there’s a long way to go! Besides having a better GSTN portal, a simpler return and a better law to bring it closer to an ideal GST, the current credit scheme also needs to be widened and the existing rates need to be streamlined. There is also a need for the multiple rate structure to be narrowed down to a two-rate structure. In addition, the tax base needs to be broadened to tax some particular petroleum products and property market in the coming times. The government should also re-look at the TCS and TDS provisions and also the reverse charge on the supplies from unregistered dealers. The GST refund process and mechanism should also be simplified and the exporters should be facilitated, so that it’s easier to do any business in India.
Tough the foundation stones have been laid, and the industry and revenue are moving towards a positive direction, there surely is a requirement to make amends in the law and procedures and then we can say that India is truly a model GST jurisdiction.
In case you have any questions around GST registration in India or taxation services in India, do get in touch with us. Our professional services at IMC promise you a hassle-free experience in this regard.