As the Goods & Services Tax (GST) regime prepares to complete five years in July, organisations across a diverse range of sectors have approved of what is often described as the country’s biggest tax reform.
In a recent Deloitte's survey of more than 200 C-suite executives working in areas such as consumer, technology, media & telecommunications (TMT), energy, resources & industrials, financial services, life sciences & healthcare and government & public services, nearly 90 per cent were of the view the transition to GST was largely positive.
Respondents agreed that factors such as competitive pricing of goods and optimised supply chains had benefitted a majority of the companies. Nearly 80 per cent felt that the government had done well in automating tax compliances and must continue to work on simplifying the tax system to enhance the ease of doing business.
About 59 per cent also believed that the government was proactive in considering industry inputs and ensuring timely issuance of GST circulars, clarifications and press notes on contentious taxation-related matters, according to the Deloitte survey, called India’s GST @ 5.
Commending enhanced use of technology, about 38 per cent of industry leaders felt that recent efforts at digitalisation by the government had been helpful, while nearly 57 per cent were of the view that they were partially helpful. This was perhaps in anticipation of the government’s long-term plan to fully automate return filings. Multiple changes in return filing formats and their contents over the past five years had also hastened the integration of processes through enterprise resource planning (ERP), leading to efficiencies in data management, compliance and analytics, they said.
Digital satisfaction levels were, however, lower for micro, small and medium enterprises (MSMEs) in comparison with large and very large companies due to the restricted availability of resources, the survey noted.
In FY23, gross GST collection for April 2022 reached an all-time high of Rs 1.68 lakh crore, thus surpassing the March figure of Rs 1.43 lakh crore by over Rs 25,000 crore. Gross GST revenue in May was 44 per cent higher YoY, at Rs 1.41 lakh crore, with receipts from domestic transactions and services imports at similar levels and goods imports contributing 43 per cent more in taxes.
“The buoyancy in the tax collection in recent months is an indicator of the success that this technologically driven tax reform has brought into the system and reflects the taxpayer-friendly nature of GST regime,” partner & leader, indirect tax, Deloitte India, Mahesh Jaising said in a statement. “It will be interesting to watch new developments coming under the GST space with a decision expected on the extension of GST compensation cess; proposals to increase and scope of GST on online gaming; setting up of the GST tribunal; and GST small seller parity issue,” he added.
Focus on EoDB, dispute redressal
The Deloitte survey also provides an insight into India Inc.’s expectations as the GST regime evolves. Respondents emphasised the need for an enhanced focus on the ease of doing business (EoDB), with a majority agreeing on including increased uniformity in the application of the law across states, resolution of a dual investigation by the centre and states and a dispute resolution mechanism to resolve conflicting rulings by states.
On legislative reforms on the issue of the input tax credit, respondents urged a review of credit restrictions carried forward from the erstwhile laws, as they only increased the cost of doing business as well as hampered growth across sectors. Freeing up working capital by considering allowing conversion of accumulated input tax credit into tradeable scrips, the cross utilisation of Central Goods and Services Tax (CGST) credit across states and the use of credit across entities in a group structure, would go a long way in providing the economy a boost.
They also felt that with petroleum and real estate outside the ambit of GST, a large part of the economy was still outside the tax net. Bringing those sectors within the purview of GST would add to the credit fungibility and reduce the cost of goods and services to consumers.
The respondents also sought the setting up of the GST tribunal and evaluation of a pan-India dispute resolution mechanism for companies to address situations of differing views between states as well as between the centre and the state. Such a framework would go a long way in setting up an integrated redressal mechanism to ensure expeditious resolution of GST-related matters.
As economic activity revives, GST collections are forecast to improve in the months ahead. Moreover, collection numbers are eagerly awaited every month as they have become a key indicator of the bottom line of India’s economy.
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