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GST has been a major structural reform of the current government. Replacing multiple taxes and cesses of state and central governments into a single tax has been a major relief to trade and industry. At the same time reduction in overall tax incidence has brought relief to the end-consumers. The IT driven tax filing system of GST has made it difficult for intermediaries in the value added chain to evade taxes. The movement of goods across the country has become faster and less cumbersome with the help of a single e-way bill carried by the transporter, and because of abolition of state check posts. GST has given a big boost to the manufacturing sector as a whole, which will accelerate the growth of the economy.
Initial difficulties faced in implementation of GST were not unexpected. However, they were quickly resolved because of the flexibility shown by the GST council in correcting course. The experience of other countries where GST was introduced shows that all of them faced some teething troubles for the initial two to three years. As compared to Australia and Malaysia, the Indian experience shows that GST has settled down fairly well. Now GST has much wider acceptability even among MSMEs.
The question now is what GST's future course should be in India. So far, the government has gone by the maxim 'the best should not be the enemy of the good'. But we must continue on a quest for the best. Having implemented GST in a vast country like India after taking 31 states on board, it is time to perfect the system gradually. In order to move towards an ideal GST, we must set an agenda for the next three to five years. Our first attention should go in the direction of stabilising revenue both for states and Centre. While states are already comfortable because of the compensation mechanism in which 14% incremental growth rate of revenue is assured, the Centre still needs to worry about its revenue.
GST revenue is undoubtedly going to get a major boost when the government implements the new system of return filing in which there will be perfect matching of invoices for availing input tax credit. At present, the total tax liability declared by registered dealers every month is Rs 5 lakh crore, of which approximately a lakh crore is paid in cash and the remaining Rs 4 lakh crore is settled by way of input tax credit. Even if we stop 10% leakage in wrong availment of input tax credit, it will mean that to that extent, the monthly GST paid by cash should go up from Rs 1 lakh crore to Rs 1.4 lakh crore.