The 14 year-long journey of the Goods and Services Tax finally culminated on the July 1 2017, with the implementation of what was touted to be the biggest tax reform for the country in 70 years of independence.
While the central government was confident of launching the GST as a Good and Simple Tax, there were a lot of others who wanted to keep it away considering it as a half-baked GST regime over the taxpayers.
The implementation of Goods and Service Tax (GST) has transformed the economy into a digital and standardised one, which in turn will now help seamless flow of information and availability of common set of data to both the Centre and the States making the Direct and Indirect Tax collections more effective.
GST Revenue Drivers and Collection Amounts
GST revenues continue to rise, owing to the number of registered taxpayers and improved compliance with more returns being filed. This is facilitated by the implementation of anti-tax evasion measures such as e-Way Bill, reverse charge mechanism and the much-anticipated system of invoice matching expected to be put into action by end of 2018.
GST collections peaked in April 2018 at Rs 1.03 lakh crores. This is much higher than the monthly average GST collection in the last financial year of Rs 89,885 crores.
Tax regime has become convenient reducing duplication and multiplicity of tax filings creating ease of doing business. From a macro-economic perspective, the government and industry expected that the GST would be instrumental in reducing economic distortions, which in turn, would provide necessary impetus to economic growth.
The Ministry of Statistics and Programme Implementation has declared India’s GDP growth to be 7.7% in 2017-18 compared to 7.1% in 2016-17. After the initial phase of GST implementation,marginal improvement was expected given the scale of changes in business and tax administration that it got along.However, this increase is expected to be temporary and GDP is projected to settle back in the range of 7% to 7.5% in 2018-19 due to reduction in initial ambiguities.
e-Way Bill :
Introduction of e-Way bill was one of the most important step in the tax mechanism which mandates all interstate and intrastate movement of goods to be registered on the e-way bill portal. There were initial struggles with the GSTN making use of infrastructure owned by National Informatics Centre. This was rectified through a staggered implementation of e Way Bills for Intra-State movement of goods.
The stability of the e-Way Bill system is seen by the number of e-Way Bills being generated over the first 3 months of the new implementation. The system has steadily generated 2.8 crores to 3.7 crores e-Way Bills, for each month from April 2018 till June 2018. This system is now stable and can be expected to handle the large number of e-Way Bills efficiently.
After the implementation of GST, it has been found out that the export industry started getting revenue and capital issue within the first month of its implementation. The export industry faced tough times till recently, due to non-availability of refunds.
To remedy this situation, the Ministry of Finance organised two “Special Drive Refund Fortnight”. The first such drive led to sanction of an amount of Rs 5350 crores of refund, in March 2018 whilethe second saw a sanction of Rs 7500 crores. With some technical glitches due to the input tax credit and exports happening in different months, many exporters have not been able to file the refund of ITC. The process being partly electronic and partly manual which made it more cumbersome and also added to the transaction cost.Total GST refund of over Rs 20,000 crores is pending with the government, as per the Federation of Indian Export Organisations.
The industry segment which benefited the most of the GST rollout was the logistics sector. With check-posts removed, truckers were able to deliver goods faster leading to quicker turnaround time.
As per a CRISIL Research, trucks are plying an average 25 km more every day or around 325 km per day. But that is still 20 percent lesser than the 400 km per day estimated before implementation of GST. In the United States, a truck runs 800 km per day on an average.
For the transportation and logistics sector, GST is expected to have a long-term positive impact with consolidation of warehouses, which will help in improved load availability and drop in vehicle transit time.
With the GST journey on the move, the government has been proactively involved in resolving issues faced by the Indian tax payers. Thereare still gaps between expectation and actual implementation of the GST in terms of a simplified tax structure, ease of doing business and overall reduction in prices. But there has definitely been an overall positive impact in terms of macro-economic growth and digitalisation in the tax system.
The views expressed in this article are of Harshad Shinde, Product Manager, GST India, Avalara