GST: The golden goose is all set to soar new economic horizons

In pre-GST days, the rate of taxation on most of the commodities was up to and around 31 percent or above with the standard rate of VAT at 14.5 percent and that of excise at 12.5 percent, added with CST, Octroi, Entry Tax, Purchase tax, etc., and then tax on tax. States were charging entertainment tax from 35 percent to 110 percent. GST has brought in new thinking with regard to indirect taxes on essential items which has been kept at nil. Items of mass consumption are generally being taxed at 5 percent while most of the manufactured items have been kept under 12 percent and 18 percent bracket. Only very few items are now being taxed at the rate of 28 percent as luxurious and sin goods. Because of GST’s relatively lower tax rates and removal of cascading of taxes, each household saved about Rs 320 every month.

With the advent of GST, India has not only become a common market—one nation, one tax—but has lower tax rates, increased tax base, higher collections, ease of trade and business, least interface in assessments with the end of license and inspector raj besides the ease of tax compliance, online simplified system and significant tax rationalisation. In the new system, all business processes like registration, returns, payments and refunds are fully online. It is completely faceless. A common national e-Way bill system which was introduced on April 1, 2018, has eased out transportation with no Entry Tax, no truck queues, no check posts and no inter-state barriers.

GST has shown high and encouraging revenue trends. The average monthly tax collection in the fourth year, i.e., for FY 2020-21 was at Rs 94,734 crore despite difficult times of coronavirus pandemic and a long lockdown. The year marked a continuous monthly revenue collection of above Rs 1 lakh crore for six months since October 2020 which went up to Rs 1,41,000 Crore in May 2021. This has been achieved even though the annual GDP during FY 2020-21 contracted by 7.3 percent due to COVID-19. If we look at the yearly comparatives, in its third year, i.e., in FY 2019-20 monthly average collection was at Rs 1,01,844 crore in comparison to the second year’s FY 2018-19 average monthly collection at Rs 98,083 crore and that of first year’s FY 2017-18 (eight months only) at Rs 89,885 crore despite the reduction in tax rates on a range of goods and services with an annual tax implication of about Rs 1 lakh crore.

Not to our surprise the number of GST taxpayers have almost doubled in four years. Total active taxpayers stand at more than 1.25 crore. Out of which more than 54 lakh are migrated taxpayers and another 17 to 18 lakh taxpayers are under composition scheme. Farmers and agriculturist are not required to take registration under GST and small businessmen/suppliers of goods under the threshold limit of Rs 40 lakhs are also exempted from GST registration.

GST IT system is a monumental platform which manages the entire life cycle of more than 1.25 crore active taxpayers—registration, returns, refund, correction, cancellation, etc., completely online and in a faceless manner. More than Rs 34.5 lakh crores have been collected through the GST IT platform in 4 years. These figures show the robustness of the GST IT systems. If the system was not fundamentally stable, then would it have been able to fetch taxes about Rs one lakh crore per month for all these years? This is the bottom line we must recognise and appreciate. At the same time, the GST system must continue to work to make its system more robust and minimise technical glitches by following the world’s best software engineering practices and thereby improve taxpayers’ experience.

India’s GST system has successfully implemented various taxpayers-friendly measures like e-invoicing, QR code, automated refund, registration with Aadhaar, Nil return filing through SMS, quarterly return and monthly payment (QRMP) scheme, etc., to enhance ease of compliance and to check fly-by-night operators, unscrupulous elements gaming the system, fake invoicing, and masterminds behind the menace of a bogus input tax credit. A number of countries such as Singapore, the UK, and other countries of the European Union across the world too have been facing problems of bogus input tax credit widely known as a missing trader or carousal frauds causing them loss to the tune of billions of dollars every year. India has been able to address many of these problems in its own innovative ways with the extensive use of technology, artificial intelligence, machine learning, sharing of information among income tax, customs, banks, etc., and judicious use of Aadhaar. No doubt, Aadhaar has immensely helped India in smoother implementation of other colossal online platforms including GST.

Undoubtedly, these measures led to better compliance resulting in enhanced collections leading to the highest ever record monthly collection of Rs 1.41 lakh crore in May 2021 despite the COVID-19 pandemic. There are several more reforms such as rationalization of rates, reducing the number of slabs, and removal of inverted duty structure on the agenda of GST Council, which will take the transformation to the next level.

Here what I wish to underline on this occasion is the fact the GST has been serving its objectives of cooperative federalism, economic growth, ease of doing business, ease of taxation and better revenue collection, voluntary compliance and formalisation of the economy in a robust and efficient way. And all in a digitised, online and faceless manner with the least human interface. GST has been criticised since its initial days just like Aadhaar was criticised over a period of time. Similarly, UPI too was criticised. Today, we all know the truth that Aadhaar and UPI both are shining examples of India’s innovation to the world. Similarly, GST too would prove one day like them that it is the golden goose of the Indian economy that is all set to soar to new heights in the coming days.