The Goods and Services Tax (GST) was designed as a solution to overcome all the problems plaguing indirect taxes in India and to unify various central and state taxes. Since time was of the essence, GST was introduced from July 2017, with the understanding that certain minor issues would get ironed out over a period of time.
However during the past five months businesses have grappled with an ever-changing situation, be it rates or procedures. While the motivation of the GST Council to address issues on an ongoing basis and make modifications on a regular basis is well-intentioned, the multiple changes in a new tax within a short period of time has made the tax perplexing for many businesses, especially small and mid-sized businesses. There are several areas where there is a need for further change or expansion and it is expected that these would be taken up in a phased manner with adequate planning to ensure that taxpayers are not inconvenienced.
The broadening of the GST framework by including petroleum products is clearly one of the main areas. While some have expressed a view that even this needs to be done in a staggered manner by bringing in products having similar tax rates across states such as natural gas, this may result in more complexity as businesses will have to keep constant track of products included and those excluded.
It may be better to bring in all petroleum products under GST even if that takes some time, instead of doing this in instalments. This would be a key step in future reform and needs to be undertaken after reaching a consensus with states.
Further broadening could happen by inclusion of the entire real estate sector and electricity within the purview of GST. Real estate is partially covered to the extent of the construction activities and expansion of the coverage could lead to the abolition of stamp duties on land and building transactions. This would also result in a better database of transactions in land and building and bring in more transparency in the sector. While various inputs and capital goods that go into generation and distribution of electricity attract GST, supply of electricity is outside the purview of GST, leading to an increase in generation and distribution costs.
The IT network which is used by taxpayers has had its share of issues on account of which there have been frequent changes in the filing dates for GST returns. While invoice matching as a concept has been deferred for a few months, it is expected that the same would be introduced after it is appropriately configured in the GST portal and is tested across a wide variety of users and situations.
The movement to a tax reform of the magnitude of GST is certainly not possible without some difficulties, but their mitigation with appropriate planning and scheduling is the need of the hour. It is necessary to bring in the reform in a phased manner so that the disruptions are minimised and business houses are not put to hardship.
The Writer is Partner, Deloitte