India Inc hopes for an amnesty scheme to resolve tax disputes in next phase of GST reforms

The Goods and Services Tax (GST) laws were made implemented in India on July 1, 2017, replacing the earlier complex Central and State taxes. Under the Indian GST, goods and services are categorised into different tax slabs, including 5 percent, 12 percent, 18 percent and 28 percent. Since then, GST collections have seen a huge rise with every passing year.

According to a poll conducted by Deloitte, India Inc. believes that the time has come to unleash the next phase of reforms in indirect tax administration to enhance Ease of Doing Business. Respondents to the survey acknowledged the need for introducing an amnesty scheme, essential for resolving existing tax disputes that had tied up business capital and government revenue. 70 percent business leaders have reaffirmed their positive reliance on evolving aspects of GST law—a 10 percent increase from the preceding year.

In the Deloitte survey, 80 percent business leaders expressed that the time is ripe for the next phase of GST regime reforms for enhanced EoDB and sectoral growth in the next few years. Business leaders across industries have been quite appreciative of the transformation brought in by user-friendly tech engines, such as GSTR 2B, sequential return filings, the timely transition of e-invoicing data, and the GST portal. However, the government must resolve current issues and demands, particularly those that are revenue neutral, to fully realise the benefits of the GST regime in India.

“India Inc. is very positive towards the changes facilitated by the GST regime and the increasing supply-chain efficiencies. India Inc. continues to look forward to the continued promotion of EoDB reforms, working capital rationalisation, and reductions in input tax restrictions. The 22 percent YoY growth in GST revenue is testimony to the overall economic development and tax-payer-centric administration. The survey indicates a positive impact on businesses of all sizes with Micro, Small and Medium Enterprises (MSMEs) being the biggest beneficiary of the simplified tax regime. About 88 percent of MSME respondents have acknowledged the reduced cost of goods and services, attributing it to the improved uniformity of the GST regime,” said Mahesh Jaising, Partner and Leader, Indirect Tax, Deloitte India.

He further added that the government could introduce additional measures for MSMEs in the country, granting them an opportunity to avail input tax credits on invoice receipts and relaxing corresponding requirements to further reduce the cost and compliance burden.

While India Inc is appreciative of the reforms in tax laws over the years, there is a push to dispel legislative ambiguities around input service distribution (ISD) vs. the cross-charge mechanism, self-supplies, and deemed valuation to ensure uniformity in the taxation system. Jaising said that the survey found an inclination towards export rule liberalisation under the GST law with 78 percent respondents citing it as the most-needed impetus, followed by unlocking working capital, removing ITC restrictions, and the removal of “deemed supply” provisions.

Notably, GST collections have been seeing a rise over the last many quarters. The goods and services tax (GST) collections for the month of May stood at Rs 1.57 lakh crore, a growth of 12 percent over the year-ago period. GST collection in May last year was about Rs 1.41 lakh crore. In April, GST collection was at a record high of Rs 1.87 lakh crore.