Daily Hot Topic
Topic : GST in India (7 Years and Counting)
GS-2 Mains : IR
Background (as of June 2024):
- GST completes 7 years, with a monthly collection of Rs 1.74 lakh crore (7.7% increase YoY).
- Introduced in July 2017 through the 101st Amendment Act (2016).
- Taxpayer base has grown to 1.46 crore (April 2024) from 1.05 crore (April 2018).
What is GST?
- Unified tax system replacing multiple indirect central & state taxes.
- Dual GST structure:
- Central GST (CGST) levied by Central Government.
- State GST (SGST) levied by State Governments.
- Integrated GST (IGST) levied on interstate supplies & imports (collected by Central Govt., apportioned to destination state).
GST Council (Article 279A of Constitution):
- Established under 101st Amendment Act (2016).
- Chaired by Union Finance Minister.
- Recommends to Union & States on:
- Taxes subsumed under GST.
- Goods & services under GST.
- Model GST laws, levy principles, IGST apportionment.
- Tax rates, thresholds, special provisions related to GST.
- Dispute resolution platform between Centre, States on GST matters.
- Voting power: 1/3 for Centre, 2/3 for States combined.
Salient Features of GST:
- One Nation, One Tax: Uniform tax structure across India, eliminating cascading effect.
- Destination-based Tax: Levied at each supply chain stage (manufacturer to consumer).
- Input Tax Credit (ITC): Allows businesses to claim credit for tax paid on inputs, reducing overall tax liability and avoiding double taxation.
- Online Compliance: GST Network (GSTN) portal for registration, return filing, tax payments, and compliance activities.
- Anti-Profiteering Measures: National Anti-Profiteering Authority (NAA) monitors businesses to prevent unfair pricing due to GST.
- Composition Scheme: Simplified compliance and fixed GST percentage for small taxpayers with turnover below a limit.
Challenges:
- Refund Delays: Streamlining export refund processes and automating refund procedures remain concerns.
- Adoption & Technical Issues: Small and medium businesses still struggle to adapt to the technology-driven system.
- 15th Finance Commission Report: Highlights concerns about:
- Multiple tax rates.
- Shortfall in GST collections compared to forecasts.
- High volatility in GST collections.
- Inconsistency in return filing.
- State dependence on central compensation.
Way Forward:
- GST has significantly improved India’s economic landscape by streamlining indirect taxes and promoting a more transparent and efficient tax regime.
- Despite initial challenges and ongoing adjustments, GST offers the potential for:
- Fostering economic growth.
- Enhancing tax compliance.
- Creating a robust revenue system for the government.
- As the economy grows, GST needs fine-tuning to address challenges and maximize benefits.
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