As the Nation navigates its way through a phase of unprecedented turbulence with grit and resilience, the Goods and Services Tax (GST) has indeed emerged as an unshakeable pillar of the economy. To mark 4 years of its implementation, we reflect on the journey that gave us India’s most significant post-independence Tax reform. The genesis of India’s biggest fiscal reform can be traced back to the year 2000, when the then Prime Minister envisioned the concept of GST and constituted a committee to conceptualise the ambitious legislation. The unification and restructuring of one of the most diverse Indirect Tax systems in the world was a colossal task riddled with challenges which were only compounded by the diversity of various stakeholders.
The Constitution (101st) Amendment Act, 2016 paved the way for the implementation of GST legislations and conferred concurrent taxing powers to the Centre and the State by insertion of Article 246A. Article 279A of the Constitution contemplated creating the GST Council, which is entrusted with wide recommendatory powers. The GST Council has since been the flag bearer of cooperative federalism and has adopted consensus to address several divisive issues.
Like all other legislations at a nascent stage, the GST Laws were not immune from interpretational and constitutional issues. To address these interpretational issues and safeguard rights, several tax assessees took recourse to Writ Remedy. The pragmatic and relentless approach of the GST Council made a plethora of writ petitions infructuous. The issuance of over 700 Notifications and 150 circulars in a narrow span of 4 years amply exhibits the keenness of the executive to ensure that GST truly epitomises a ‘Good and Simple Tax’.
Despite a solid foundation, certain areas of tinkering such as reducing compliance burden and resolution of legislative ambiguities, would behove the trade. For instance, the promulgation of a definitive and sector-specific methodology to ascertain profiteering would secure passage of benefits to end consumers. Another area that warrants a re-look is the regular use of retrospective amendments, which deprive taxpayers of tax certainty. The GST Council may consider introducing retrospective amendments as a last resort and use such a legislative device sparingly.
The elimination of cascading effect of taxes was one of the primary objectives that GST purported to achieve. Absolute restrictions in the availment of credit on specified goods and services and measures capping input tax credit of un-reported transactions have also been mandated in the GST legislation. Such bottlenecks in credit entitlement have served as impediments in eliminating the cascading effect of taxes and are the subject matter of challenge across various High Courts. The GST Council must expeditiously address factors that impede the credit flow to truly realise the goal of a seamless credit chain and reduce the burden of courts. Further, while the ambit of levy under GST can be stretched to include petroleum products, the levy has been deferred. The exclusion of such products from the impost of GST hampers the seamless credit flow.
Regardless of room for change, it is undeniable that GST is a landmark reform in the legislative history of India and has taken years of unrelenting efforts to fructify. A GST Law that aligns itself with the vision of “One-Nation One Tax” and lends itself to the “ease of doing business” initiative shall go a long way in securing the confidence of India Inc and unleashing a buoyant economy.