By Seema Chhabra Arora & Tagadi Manjunath
It has been six years since the formulation to implementation of Goods and Services Tax (GST) in India. The evolution of GST in India from its teething problems to success stories have been adequately captured by media and other forums. The fact of impressive and steady increase in revenue collection over the last six years (from Rs 70,000 crore in July, 2017 to Rs 1.57 lakh crore gross GST revenue in May 2023), a phenomenal increase in tax base (from 72 lakh tax payers to around 1.2 crore tax payers), elimination of cascading effect in taxation to enhancing the speed of transportation of goods (Travel time of cargo vehicles cut by at least one-fifth) etc have rightly made the headlines.
However, the effect of GST goes far beyond numbers and statistics which also merit the attention. It has transformed the indirect tax administration, empowered small and medium-sized enterprises, reduced the burden on taxpayers, and digitised the tax compliance process. It has also strengthened the ease of doing business, attracting both domestic and foreign investments, created a business-friendly environment that fosters innovation and entrepreneurship. As we commemorate the implementation of GST, it is imperative that we look at these less-talked–about consequences of GST implementation.
First, implementation of GST was preceded by a technological and administrative reimagination. From being regulators to facilitators to partners in reform, tax officers were required to embrace technology to bring simplification of procedures while nudging voluntary compliance. This necessitated the shift from traditional office to e-office, shredding physical files to operating through All- in- one (AIO). Adoption of this paperless and faceless mode of administration is truly transformative. Data analytics reports like Advanced Analytics in Indirect Taxation (ADVAIT) which help to understand taxpayer behaviour, reports of DGARM in detecting irregularities, devising of advanced data analytics tools such as BIFA and GAIN, etc, bears the testament to how quickly the indirect tax administration has adopted to this transformation.
Second, GST implementation has accelerated the progress towards “Digital India.” From the generation of invoices to return compliances and refund claims, each step of the business reporting has been digitized through Goods and Services Tax Network (GSTN), ushering in the spirit of minimum government but maximum governance.
Third, as the taxation system is in line with the GST system followed in as many as 160 countries, it helped attracting foreign companies by providing a familiar tax system thereby creating a unified competitive market. The record inflow of FDI, in part, is attributable to this taxation system. With GST, entire country is transformed into one market and the tech-savvy entrepreneurs used this opportunity to scale up their operations across India and to attract talent and capital there by making India home to the third-biggest start-up ecosystem in the world.
Fourth, GST regime provided level playing field to Micro, Small and Medium Scale Enterprises (MSMEs). With 9 million registered enterprises, this sector is the backbone of national economic structure. Increasing of exemption thresholds, waiving of mandatory registration of small online vendors below certain turnover, and extending the facility of filing NIL statement on monthly basis in GSTR 3B/1 return through SMS etc are targeted to this segment. A new Quarterly Returns Monthly Payment (QRMP) scheme was specifically created for small taxpayers to file quarterly returns but pay monthly tax. That is why, the recent surveys have highlighted that 88% of MSMEs owners have felt that GST has reduced cost of both goods and services and optimized their supply chains. The credit must be given to the farsighted policymakers for providing the fillip to rejuvenation of this sector under GST. This is also evident in the involvement of no less than finance minister, even during Corona times, by initiating the special refund drives in order to ensure the liquidity flow to MSME businesses.
Fifth, GST Council meetings have become the shining examples of cooperative federalism. Over the course of 49 meetings, Centre and States have deliberated, discussed, and decided various complex issues to make this more responsive and nuanced reform. GST Council, working like a mini-parliament has also transformed the very idea of centre-state cooperation and strengthened our republic. When the history is chronicled, this portion of GST contribution will be remembered and cherished by all.
Six years is a short journey in the lifetime of such a landmark tax reform but it stands out because of its galvanised effect that helped lay a robust foundation for the future. The evaluation of any tax regime will have to be based on the impact it has had on the taxpayers. In fact, at the centre of this journey have been the resilient Indian taxpayers. They not only accepted changes brought in with the roll out of GST but also voluntarily complied with the new regime quickly even under the distressing times of Covid pandemic. Therefore, as we enter into the seventh year, we should not only celebrate the reform and its contributions but also the resolve and the resilience of Indian taxpayers.
The authors are respectively, Pr. DG DGGST, and, joint director, DGGST, CBIC