The Goods and Services Tax, popularly known as GST, is just three weeks away from celebrating its 1st anniversary mark. It was a ceremonial affair where the President of India, Pranab Mukherjee, along with the Prime Minister of India Narendra Modi announced the implementation of the most awaited reformed taxation, the GST.
After years of trial and turmoil, the NDA-led government implemented it from 1st July 2018, at the midnight special hour. The launch was marked as a historic event with both the houses of parliament convened at the Central Hall of the Parliament.
It’s nearly one year since the introduction of the new indirect tax regime. It was after 70 years of our Independence that the tax system was revised. The modification in the GST or the consumption tax is levied on the sale of goods and services.
The changes in the indirect tax system was deemed necessary to simplify the taxation by opting for ‘GST: One nation, One tax.’ GST is applicable at every step in the production process, but is refunded to all the middlemen executives in the stages of production, except the final consumer. The GST is levied at the place of procurement and not at the place of production.
This one step indirect tax replaced several other taxes like the central excise duty, services tax, additional customs duty, surcharges, state-level VAT etc. The GST regime has also demolished taxes that were applicable on inter-state transportation of goods. GST involves sale, transfer, purchase, barter, lease, or import of goods and services.
The Indian GST model follows a dual character. It is administered by both the Union and the state governments. Exchange of goods and services within a state is levied Central-GST (CGST) by Central Government and State-GST (SGST) by the State governments. In case of inter-state purchase, an Integrated GST (IGST) is levied by the Central government.
The GST incurs variable rates for different products. The different GST slabs are 0%, 5%, 12%, 18% and 22%. With some exceptions being made to dairy products, petroleum, gold etc.
Revision of Tax Slab Rates
The GST reforms have had a total of 27 meetings in just one year denoting the unstable marking of tax slabs. These slabs have had a severe impact on consumer-oriented markets. Fixing of prices and allotment of discounts all depends on the indirect tax regime. And frequently modifying it make the work even more complex to calculate and to fetch new labels.
GST rates in India have been touted to be one of the highest in comparison to other developing countries. And the presence of 4-5 different slabs for different products only leads to confusion. Although reduction in the tax rates was a welcoming step, it needs a more rationalized approach for a sprouting business environment.
Getting Accustomed to it
For smoother business and market operations, traders had a really hard time getting used to the new taxation policy. Dealers had to obtain a GST registration in each state of operation. One of the key challenges of service providers was to bear with the GST portal. Due to the technical glitches and setbacks, the government has extended the dates of return-filing and also looks forward to a simplified version of registration.
Introducing E-way Bills
E-way bills were introduced for ease in the transportation services as tokens to be uploaded online without any hustle, but to everyone’s’ surprise the portal crashed on the very launch day due to site traffic. The Government has been quick in responding and thus came with the idea of opting for two different E-way bills, one for inter-state and the other for intra-state.
Blockage of Working Capital of Exporters
The GST council had a meeting on the refund issues on export items. The Central and state government authorities keenly observed the problems faced by the various exporters and has promised to adhere to them at the earliest. Export duties were given special category of the economic section and this has created a haywire of sorts for the zero percent slab rate. The export rate witnessed a setback but with timely intervention from the government, things will get smoother in the coming times.
It was observed that GST led to a price hike, hence the need arose for anti-profiteering guidelines. These were issues to make sure the end users are benefited with the GST rates. It will help control inflation. Price swinging from the retailers stock can be overcome by the provisions in anti-profiteering rules to safeguard consumer interests.
Complex and Uncertain provisions
Although GST was implemented to have a smoother and simplified tax regime. But as is the case with any new law, it comes with its own set of uncertainty and complexities and GST was no exception to the law. This one year journey of GST was met by many hurdles and uncommon problems and mixed reactions from people all around India. GST had to overcome issues like refund problems, changing rates, curbing inflation, monitoring double taxation, omitting credit blockages etc.
GST has fought many economic hurdles at the very nascent age and looks prepared to enter its 2nd year of glory. GST has empowered make in India and the problem of dual taxation. The improvisations made help us understand the economic fragmentation the better way and has assisted in curbing tax defaulters.