GST risks losing its idea of oneness: 

GST risks losing its idea of oneness

Context

  • GST risks losing its idea of oneness

Challenges faces by GST

  • GST: ‘One Nation, One Tax’— GST now as multiple tax slabs. And unless the GST Council addresses this, any such expansion of the scope of GST to bring in more sectors will be risking this marque piece of tax reform.
  • The back-end of the GST manned by the GST Network (GSTN) is not operating optimally
  • GST council suspended the nation-wide rollout of the e-way bill system till 1 April next year.
    • The e-way bill, an electronic receipt that businesses and traders have to secure to transport goods beyond 10km, was to be operational by 1 October. This was supposed to replace the check-posts (notorious for delaying consignments and exchange of bribes and allow for seamless movements of goods, consistent with the notion of one nation and creating competitive efficiency.
    • Most states had formally withdrawn the check-posts, but with the ensuing confusion there is word that they are making a slow comeback. This would be disastrous and strike at the roots of the principle of a unified market.
  • The GST Council has put on hold for six months the reverse charge mechanism (RCM)
    • Under RCM which large entities were required to pay taxes on purchase from unregistered small and medium enterprises (SME) operating in the informal economy. This SME space doesn’t have the wherewithal to comply with the GST rigour, the new tax regime had placed this liability on the large enterprises buying from them—in return they got tax credit for this sum.
    • Lobbying may further delay RCM; if this does happen once again the GST architecture designed to widen the tax base may be compromised.
  • Active lobbying to tinker with the existing ‘composition scheme’ for taxpayers with up to Rs75 lakh annual sales.
    • Under the scheme they were to be charged a levy instead of GST and hence not eligible for input tax credit and selling inter-state.
    • Recently the GST Council it was decided to raise the threshold to Rs1 crore and now lobbying is on to allow these taxpayers to also claim input tax credit and sell inter-state. If it goes through, it open up an opportunity for misuse as taxpayers will prefer paying a levy instead of GST, and it will also encourage cash transactions and hurt the original plan of extending the tax base to unregistered units

Conclusion:

  • There are some glitches in GST which need to be fixed. But there is no need to panic, because although it opens the doors for opportunists to restore the status quo made up of large cash-based trade transactions outside the purview of the indirect tax system.
  • The onus is on the GST Council to fix the glitches in the tax reform as it threatens the fundamental principle of GST: ‘One Nation, One Tax
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