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Maiden Year For GST: Key Accomplishments And Shortfalls

With a strong resolve to create a better India, our Government, if given a chance will ensure the country reaps full rewards of GST in the next five years to come

Photo Credit : PTI


GST completes its maiden year in the world's largest democracy. This itself is an accomplishment to begin with. GST took sixteen years to fructify. Many thought it will be practically impossible to implement GST in India as it had to subsume numerous indirect taxes and required multiple amendments in the Constitution. But under the dynamic leadership of Narendra Modi and the Ministry of Finance, supported by countless number stakeholders who have been instrumental in drafting the law, GST became reality and catapulted India in a path of transformation.  

GST has been a continuously evolving process over one year. There were significant gaps in the law when it was released for the first time. However, The Government and the GST Council had been consistently making efforts to refine GST with each fleeting phase.

While every effort has been made to legislate the perfect form of GST (with matching mechanism and anti-evasion safeguards ingrained in its construct) the Government failed to realise that the sheer number of returns, compliances and inherent complexities will overwhelm trade and commerce who were simply not ready for it. Thankfully, the Government took prompt steps to streamline compliances and came up with a "compliance friendly" GST framework over the course of this year.

Introduction of GSTR 3B was the first step towards the simplification process. The filing process was further simplified for those furnishing nil returns. Realising the difficulty of assessees, Government also extended the date of implementation of reverse charge provisions for purchases from unregistered dealers as well as the TDS/TCS compliances.

GST has also proved to be a unifier for trade and commerce with the vision of one nation-one tax. This has helped companies organise their supply chain and cut down on significant expenses and the effects are tangible. An increase in credit pool coupled with reduction in rates for output supply has increased profitability and the Government has tried to make sure profits are passed on to the end consumers through stringent antiprofiteering laws.  

Ever since introduction, the Government has been closely monitoring the pulse of the businesses and has been rationalising rates wherever it observed a misfit. The GST Council also took a pragmatic approach in reducing tax rates on 178 from 28 percent to 18 percent on essential commodities for the common good, even in the wake of dwindling GST collections.      

For exporters, the refund mechanism under GST has taken off with minimal fuss. Exporters are getting refunds with lesser hassles and delays as compared to the pre-GST regime. Transportation time and costs have reduced significantly in light of the convenient e-way bill mechanism. The overall impact of the GST regime has been positive on the logistics sector.

However, the law has also faltered in many places. Glitches in the GSTN portal has proved that the supporting IT infrastructure (considered the backbone of GST) is woefully inadequate. Multiplicity of rates, classification issues and lack of clarity in legal provisions have left businesses scratching their head. Adverse rulings from AAR has become a trend and assessees are slowly losing faith in the adjudication framework under GST. Besides government's reluctance in ironing out legal issues such as "pre-import" condition for benefits under advance authorisations, denial of refunds on procedural grounds and reduction / abolition of benefits under area-based exemptions and State entertainment tax are compelling businesses in approaching High Courts, seeking writ remedies.

The GST law is not unblemished. It needs a long voyage towards perfection. Benefits of GST are aplenty but there are many gaps that need to be stitched. Overall, this has been a promising one year for GST and as India gears up for GST version 2.0, the government seems to be taking small but steady steps in the right direction. With a strong resolve to create a better India, our Government, if given a chance will ensure the country reaps full rewards of GST in the next five years to come.

(With inputs from Pratyushprava Saha, Senior Associate and Abhishek Deodhar, Associate)

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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One year of GST economy narendra modi

Abhishek A Rastogi

The author is Partner at Khaitan & Co

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