The introduction of e-way bills coupled with the crackdown on fake invoicing has helped in bringing in a substantial portion of GST revenues, which were either being evaded or under-reported.
E-invoicing system would also usher the taxpayers into a fully automated compliance regime wherein the computation of tax liabilities and matching of input tax credit would become very simple.
Simplification of Compliance:
Various initiatives viz. linking the customs portal with GST portal for credit availability on imports, making available proper means for matching input tax credit, increased automation of the refund procedure to seamless operation of the Invoice Registry Portal, helped simplify tax compliance.
Functioning of GST Council:
The GST Council made corrections to law, issued clarifications on complex issues, rationalized GST rates and introduced relaxations for dealing with the Covid-19 pandemic, which establishes that the GST Council structure has been very functional and agile.
Example to the World:
India has served as an example to the world by successfully implementing one of the most complex tax transformation projects for the country.
Challenges:
Fiscal Federalism:
This issue became controversial when GST collections fell because of the pandemic.
Because GST entailed a bigger surrender of taxation powers for the states – states do not levy direct taxes or customs duties – a guaranteed revenue growth of 14% for a period of five years was offered to them by the centre to get them to agree.
Issues Highlighted by the 15th Finance Commission:
The 15th Finance Commission has highlighted several areas of concern in the GST regime relating to multiplicity of tax rates, shortfall in GST collections vis-à-vis the forecast, high volatility in GST collections, inconsistency in filing of returns, dependence of States on the compensation from Centre and so on.
Large Businesses vs Small Businesses:
The fundamental principles on which the GST law was built viz. seamless flow of input credits and ease of compliance has been impaired by IT glitches.
Indirect taxes, unlike direct taxes such as income tax, do not differentiate between the rich and the poor and therefore put a bigger burden on the latter.
Further, small and medium businesses are still grappling to adapt to the tech-enabled regime.