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Assessing the GST Regime (GS 3,Economy,UPSC IAS Mains)

What is the issue?
With one year of GST in place, a retrospective look at its impact, particularly for industry and services sector, becomes essential.
What was the objective?
  • ‘One nation one tax’ was the philosophy and narrative of the government for GST.
  • It was also a part of the vision to improve India’s ranking in ‘ease of doing business’.
  • GST thus aims at addressing the country’s complex indirect tax framework.
What are the favourable aspects?
  • Governments have had an open approach towards GST implementation constraints.
  • They have undertaken immediate corrective measure to resolve issues.
  • The GST Council has demonstrated a collaborative effort and consensus-based approach.
  • The government thus carried out a rate rationalisation exercise.
  • This was to reduce rates on about 178 items from 28% to 18%.
  • This had a positive effect to an extent, reducing the tax burden.
What are the concerns?
  • Rate changes - Given the short time-line, it resulted in several challenges for business.
  • As, they had to revise their IT systems overnight.
  • Revising pricing labels, revising pricing strategy were the other challenges.
  • Besides, some had to deposit huge sums of money due to anti-profiteering for failing to execute required changes in time.
  • E-Way Bill - This was one of the major changes on the supply chain and logistics front.
  • This was to ensure common documentation for movement of goods across the country.
  • But the e-way bill provisions are not uniform across States.
  • This has diluted the very objective of a common e-way bill.
  • It has created problems for businesses operating with pan-India presence.
  • As, they had to set up State-wise e-way bill systems.
  • Services Sector - Under the Constitution’s framework, State and Centre collaborate for taxing a particular services transaction.
  • Logically, there have been implementation challenges in terms of billing for pan-India contracts, and State-wise credit pools.
  • Also, the sector is dealing with challenges around intra entity supplies and input service distribution.
  • Compliance - One aspect that affected all the sectors was filing three parts of the monthly return for regular dealers.
  • This had to be done with matching of the invoice-level details of the supplier with that of the recipient of supply.
  • Government has abandoned its original plan and instead implemented a simplified return without any matching concept.
  • This is, however, only on a temporary basis.
What next?
  • Next wave of GST is likely to include products that are currently not in the ambit of GST.
  • These may include petroleum products, alcohol and real estate.
  • Changes are expected to be made to the GST law in the next Parliament session.
  • The GST Council has been working on this draft to address some of the key issues.
  • The objective of GST to improve the ease of doing business largely depends on further appropriate streamlining of the regime

Source: XM

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