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Najib Shah

An anniversary is a good occasion to pat yourself on the back, more so if it is of a sweeping fiscal reform like the Goods and Services Tax ( GST); and if it is the third anniversary, it is also an apt occasion to take a step back and reflect if it has lived up to its expectations.

The fact that it could be launched at all, given its long-troubled gestation, and the hype surrounding its launch, raised a lot of expectations- it was thought that the law would be a panacea for all things fiscal; revenues would be generated, laws would become simple and friendly, fiscal disputes would disappear, technology-enabled filing of returns would make compliance easy and evasion difficult. Three years down the line the jury is still out.

Revenue has not been doing well. The understanding was that better compliance, both because of, the availability of credit at every stage and which would prompt the taxpayer to be compliant and, a technology which would enable the legal provision of matching of invoices to be carried out smoothly, would make evasion difficult and result in growth of revenue. This has not happened.

Technology has still not settled down; perhaps the expectation was too high- the explicit provisions of technologically enabled matching of invoices, the one real check on attempted incorrect availing of credit, is still only in the statute book. With no matching taking place, evasion is rampant. As per a PQ reply in excess of Rs 45,000 crore of cases of evasion have been detected. Yes, revenue ultimately reflects the condition of the economy, which has been doing indifferently even before the lockdown and since, been doing very poorly -that unfortunately has not stopped evasion.

The multiplicity of rates is an issue troubling the taxpayer. Tax administrators would be very happy with a single rate- a revenue-neutral rate of 16%-18% would make for good economics. Very unlikely for good politics though- so convergence as a goal is far away.

An ideal tax system ought to have had one tax administrator. However, because of the unique federal nature of the country, this was not possible-the next best thing was to ensure that jurisdictions did not overlap. This is in place -but in several areas, there are discordant notes.

Thus, we have an authority for advance ruling, a key taxpayer facility, in every state, and the rulings on the same issue between two states are not always uniform, an anathema to the very concept of GST.

Technology has to constantly evolve and adapt to the requirements of law. Thus, while substantial progress has been made since the days when the system crashes, it is still an area of concern. The taxpayer experience has still been poor with the technology being provided.

The GST council, the one big success story of GST has been doing well. The Council has risen to the challenge of balancing myriad interests-of different states and the Centre. The Centre has earned the trust of the States -and should ensure that it does not lose it.

Moneys due in the form of the commitment made to compensate them for losses because of having shifted to GST should be released-this is really the glue that will keep the Council functioning as an effective body.

Simplification of laws, with the experience of three years, should be an ongoing process, as should rate rationalization leading to as much a degree of convergence of rates as acceptable.

Taxpayer facilitation should be closely looked at-the process of paying the tax should be made as simple as possible. Litigation, a major area of concern in the earlier fiscal laws is again rising-in the absence of Tribunals which have yet to be constituted, the number of unresolved cases will increase.

Thus, while there is cause to celebrate, these issues also need to be addressed so that GST will indeed become the transformative tax it was meant to be.

(The author is former Chairman, Central Board of Indirect Taxes & Customs)

First Published:Jul 1, 2020 7:32 PM IST