GST IN THE STREAM LINE OF DEVELOPMENT AND CHALLENGES

INTRODUCTION:

The term “Tax” means an ‘amount of money that is imposed by government on people’. The taxation system is not a new duty; it has been done since the ancient history times and later followed by the British’s during colonial era and now by the laws that governs with regard to tax imposition. The amount which imposed on people will be used for the purpose of development of the country. The GST taxation has been introduced by France in the year 1954 and later it is followed by 160 countries and GST is one tax reforms and is regarded as major taxation reform that implemented by India since Independence. India has implemented the tax reforms on 1st July 2017. GST is a VAT tax that will replace with all other Indirect taxes that separately imposed by Central and State Governments.  As stated by Former late Union Finance Minister of India Mr. Arun Jaitley that “there will be check on inflation and will be difficult for the avoidance of taxes, rates will be lower compare to earlier, the country’s GDP will be benefit and the extra resources of center and state will be used for the purpose to serve poor and he also added that this will be new beginning of India”[1].

Though for the first time in India; it is introduced in the year 2003 under NDA’s government but it failed to implement it due of difference of opinion between the legislative members. However; in the year 2017; it has successfully implemented all over India through The Constitutional (one Hundred and First) Act; 2016[2] and the Act effect by the Hon’able president of India’s assent and amendments taxations laws. For the application of GST tax reforms more than 15 states has passed Bill. Application of GST takes place is Manufacturing of Good and Service and consumptions of good and Services throughout country at a multiple stages. GST taxation reforms are regarded as biggest reforms in Indian Economy which will helps in robust of economy development at both domestic and International market level.

HISTORY OF GST IMPLEMENTATION:

GST taxation system has come into existence in the year 1954 and for the first time it is adopted by France and followed by 160 Countries. Recently Malaysia has also started to implement Value-based Taxation system. India have Implemented the GST taxation reforms in 2017.

History of Implementation of GST Taxation system has a long back where; for the first time discussion over the implementation of GST reforms has happened during the Atal Bihar Vajpayee Reign in the year 2000. Later in the year 2004 The Fiscal Responsibility and Budget management committee was formed and recommended the Introduction of GST.

During 2006-07 Budget speech; then the Finance Minister has accounted that the GST Taxation system will be formed by April 1 2010. However the implementation GST system has moved further due to various reasons. In the year 2011 the Constitution (one hundred and fifteen) Bill[3] was introduced in the parliament. The Bill is in relation to incorporation of certain provisions in GST and the standing committee has made detailed examination over the bill and in the year 2014 due to General Election in India the bill has lapsed.

In the Year 2017 by the Constitution Amendment of (one hundred and twenty second) Act[4]; 2016; the GST Taxation System has come into its implementation from 1st July 2017 along with The CGST Act; 2017[5], The IGST Act; 2017[6], The UTGST Act; 2017[7], The GST (Compensation to the States); 2017[8].

CONCEPT OF GST TAXATION:

GST is an equal and composite of all the indirect taxes of both central and state governments and they include all the indirect taxes of both in a unified taxation system. The system of imposition of GST taxes includes all the stages of Goods and Services of value addition. India follows the dual taxation impose system in which when the taxes are imposed by central then those comes under CGST (Central Goods and Service Taxes) and such taxes include like Central Excise taxes, Central service Tax, Additional Excise tax etc., Whereas the tax impose by the state government come under SGST (State Goods and Service Taxes) and such taxes include all VAT of State government, Luxury tax, taxes on lottery, betting and gambling etc. whenever there are interstate transactions of Goods and Services then those comes under IGST (Integrated Goods and Service Taxes).

GST taxes does not include taxes like entertainment taxes that are imposed by Panchayet or municipality or any regional or district, Alcohol consumption taxes, Basic Cess taxes on any custom duty, on Products that include Petrol, Diesel or any oil products.

Tax payer whose aggregate turnover of 20 lakhs rupees and 10 lakhs rupees in north eastern states in a financial year need to pay to GST on Goods and Services. In this special category states are exempted.

According GST taxation system there are five different slabs of imposition of Taxes. There are

-0%, -5%, -12%, -18%, -28% but petroleum, alcohol, electricity are not included under GST.

 LEGISLATION OF GST:

Under the constitution of India (one hundred and twenty second) Bill; 2016 is passed for the introduction Goods and Service tax reforms in India. The bill for the introduction of the tax reforms in Rajya Sabha It is passed on 3rd August 2016 and later in Lok Sabha on 8th August 2016 and after passing the bill in both the houses later the President of India has accord his assent on 8th September 2016 and the bill notified as the Constitution (one hundred and twenty second) Act; 2016.

For the implementation of GST Tax reforms the following Acts were passed by the legislation and the same has come in to effect on 1st July 2017.

1.     The CGST Act; 2017,

2.     The IGST Act; 2017,

3.     The UTGST Act; 2017,

4.     The GST (Compensation to the States); 2017,

Along with these Acts states has passed The SGST Act; 2017. And the GST council has also formed under Article 279 (1)[9] of the Constitution by the Amendment and President of India has formed the council which came into effect 12thSeptember 2016.

GST Council will give recommendations to the center and states on issues related to GST.

NEED OF GST AND ITS IMPACT ON INDIAN ECONOMY:

Introduction of Taxation system is on of the major taxation reforms in India. The introduction of GST System helps in consolidating of various taxes of Center and States into One Taxation system. Single taxation helps in reduce of double taxation, issue of different tax system and cascading effect and multiply of taxation system. GST Tax system has a wider tax base and rationalization of tax structure and harmonization of central and state administration. The new tax regime has played an important role in subsuming of 17 taxes and 13 Cess into “One-nation, One taxation” structure. After the Introduction GST tax regimes in India leads to uploading of each and every document to the portal which enables to create more transparency in tax structure.

Before the implementation of GST tax regimes the center could tax up to production or manufacturing stage of goods or service while states government can impose for its distribution. For the purpose services it could done by only central government. But after the implementation of the tax regimes the taxes can be imposed by both the center and state Governments and the distribution of Tax share can also be done.  

Before the implementation of GST reforms, the total of VAT, Excise, CST and their cascading effect leads on an average of 31 percent of tax liability on each individual. But the implementation of GST the liability on a person has reduced.

Since the implementation of GST tax regimes in “the year 2017 there are 66.25 lakhs tax payer but in the year 2022 there are 1.38 crores of registered tax-payers”[10]; this clearly shows that there double of registered tax payers.

GST COLLECTIONS SINCE IMPLEMENTATION[11]:

Year	GST collection Rs. (in crores)
FY 2017-18	7, 19, 078
FY 2018-19	11, 77, 370
FY 2019-20	12, 22, 117
FY 2020-21	11, 36, 803
FY 2021-22	14,83,291
FY 2022-23	18,07,680

Since the implementation of GST reforms there is gradual increase of GST tax collections; when we look into year FY 2017 it is 7, 19, 078 lakh crores but gradually there is an increase in the collection of GST on an average of 10 Lakh crores till 2019.

In the Year FY 2020 there is a decrease in the GST collections due to Covid-19 Pandemic; but later in the year FY 2021, FY 2022 there is surge in the collection of GST because of resumption of economic activates.

IMPACT ON GDP[12]:

As per data published by the CMIE; in the FY2017 before the implementation of GST the GDP of the country steady rising at 8.26 per-cent and after when GST tax regime has started to its roll-out the GDP has fallen down to 6.80 per-cents; the fallen down of the GDP is not only just because of GST roll-out but by surprise move of Central Government called demonetization in the year FY2016. As a result due to announcement of back to back reforms leads to fallen of GDP to 3.74 per-cents by the end of FY20.

Later after these year again fallen in the next two years due to covid-19 which has led to fallen down -6.16 per-cent in the FY20. Later; from FY21 because of resumption of the economical activates leads to regain of the GDP of 7 per-cents the country in the present year FY24.

IMPACTS OF GST REFORMS:

POSTIVE REFORMS:

GST implementation played a crucial in creating new reforms across the country like E-Way bill, E-Invoice bill.

E-Way bill: this is one of the new instruments created under GST implementation; which helps in transfer of Goods and Service across the state borders in an easy manner. This bill is effective in tracking and regulations of the goods and also helps in decrease of tax evasions.

E-Invoice bill: This bill helps in creating of automatic invoice generation of the bill which is exchanged between the firms and tax authorities. The bills also minimize the manual exchange of bills between the firms and authorities and reduce the errors while exchanging.

Linking of E-way bills with Government Portals: Government portal like VAHAN portal where the exchange of information has taken between two platforms in a real time. The linkage enables the authorities to cross check data that provided in the E-way bills against the other data base papers in an easy manner.

Unified Taxation system: All the different indirect taxes of center and states have merged into one taxation system. This helps in administration of tax system in an easy manner, reduce the compliances challenges and reduce multiple taxes paying system which resulting in more effective and creating a transparent tax regime.

Digitization of process: Digitization of the process helps in reducing the paper work and makes the tax payer to register himself through online and pay the tax returns and taxes through online portal rather physical paper work submissions and paying. 

NEGATIVE IMPACT:

Dual Control: GST tax reforms have always referred as single taxation system but in reality the reforms are both under the control of center and state and they collect a separate tax by both on a single transaction.

Several Sectors are at a loss: when we look into sectors like Pharma, Agriculture, Media, Telecom, Mobile, Jewellery items are facing a burden to pay the GST taxes due higher slabs and their increase in price of those material items; this leads to creating a burden on tax-payers while paying the Taxes.

Regressive Tax paying system: irrespective of the Income of the person; the taxes has to be paid by the each and every individual at a same rate and leads to depleting their savings.

Effect on small-business: before the implementation of reforms under the excise law; no need of registration of small-businesses if the annual turnover is less than 1.5 crores. But after the implementation of tax reforms registration need to made if annual income is above 10 lakhs for special category states and 20 lakhs for other than special category states. It is affecting the small-business and affects their livelihoods.

CHALLENGES AND RECOMMENDATIONS OF GST:

1.     Though; it’s already 6 years of launching GST tax regimes in India but still most of the Small scales Enterprises business members are not aware of using GST technology infrastructure and Filing of returns at the portals. So; in order to avoid such there should be awareness campaigns and training to educate the people who are not aware of its usage.

2.     As per the GST tax regimes; there shall be “Unified taxation system” but in relatity there multiple slabs which are creating an increase in price of Goods and Service which are already costly before. In order to avoid increase in prices of Goods or Service there shall not be multiple Tax slabs.

3.     When the Business operating are at multiple states then registration has to be done each state as per provisions of GST; which is creating a burden over the administration and increases compliance cost to the individual when need to establish a business at Pan India level, contributing to logistic challenges. In order avoid such burden over administration there shall be done amendments over the provisions of registration of Business at across the states.

4.     Due to multiplicity of registration of GST is leading to creation of bogus firms and evading of taxes by the members. To avoid creations of bogus firms and claiming of ITC (Input Tax Credit) of such firms there shall be proper monetization by the authorities.

5.     There is a lack of co-ordination between the center and state. When the Center issues a notification or circular for the implementation of the new provisions at the state level but the states are complying over such due to lack of co-ordination between center and states and leading to individuals are suffering and they are not having awareness over such new provisions.

6.     Since the implementation of GST regimes; there are no GST appellant tribunals in such place. Due to non-formation of GST appellant tribunals the tax payers are facing problems against the order issued by the GST council. The burden over the GST tax related matters are increasing day-by-day at the High courts of respective states. So; there shall be formation of GST appellant tribunals has to be done.

CONCLUSION:

In 21st century; where the globalization is increasing day-by-day there shall be need to have powerful and systematic tax structure for the purpose competing at the International Level. GST tax reforms are unique in its administration frame work, design and structure. The implementation of GST will not only bring the transparency at the system but it also promotes ease of doing business. Before the implementation of GST tax reforms; the taxes are levied by the state government at the different level which is leading to increase prices and tax liability and it also cause case ceding effect which affects the FDI (Foreign Direct Investments). The GST implementation has brought structural and smoother taxation system. By the implementation of GST tax reforms will reduce the tax evasion and create transparency in monetization to the authorities; which will benefit both the Government and Consumers. The reform also helps in robust of Indian Economy.

To conclude; GST tax reforms are one the major tax reforms that has implemented by India for the purpose of development. But in order for the successful implementation of the reforms there shall be accompanied by the robust infrastructure at Taxation system and engaging learning process will benefit for both official and tax payers.

[1] https://timesofindia.indiatimes.com/business/india-business/in-10-charts-how-gst-has-evolved-in-last-5-years/articleshow/92659930.cms(last visited 20/04/2024)

[2] The Constitutional (one Hundred and First) Act; 2016

[3] The Constitution (one hundred and fifteen) Bill; 2011

[4] The constitution amendment (one Hundred and twenty second) Act; 2017

[5] The CGST Act; 2017

[6] The IGST Act; 2017

[7] The UTGST Act; 2017

[8] The GST (Compensation to the States); 2017

[9] Article 279(1); Constitution of India

[10] https://timesofindia.indiatimes.com/business/india-business/in-10-charts-how-gst-has-evolved-in-last-5-years/articleshow/92659930.cms (Ministry Of Finance, PIB)

[11] https://www.ijnrd.org/papers/IJNRD2212241.pdf (last visited 20/04/2024)

[12] https://ijcrt.org/papers/IJCRT2307572.pdf (last visited 20/04/2024)