Rise of India’s biggest tax reform GST in last two years

As the goods and services tax (GST) completes two years yesterday, we will see how the new indirect tax agenda has emerged. The GST has been one of the biggest tax changes that the country has ever seen and despite early problems, it has started to settle down well. Tax collections have been increasing and systems are getting streamlined.

Here are five reasons that tell the elevation of the GST over the past two years:

No. of registered taxpayers: The no. of registered taxpayers at the time when the GST was rolled out was Rs 65 lakh, which today is Rs 1.2 crore, a straight rise of  84 per cent in last two years. This shows a significant widening of the tax base and making of the economy under the GST.

Monthly Tax collection: Monthly GST collections for July 2017, the first month for GST, was Rs 92,200 crore. Later on, it reduced to Rs 83,700 crore in November same year, the minimum monthly collection made. Collections started rising from the second year onwards with July 2018 collections at Rs 96,500 crore. That was almost Rs 7,000 crore more than the avg. monthly collections in the first year. In 2018-19, the avg. monthly collection was Rs 97,100 crore with collections breaching Rs 1 lakh crore on a regular basis. The collection in May 2019 was Rs 1.03 lakh crore.

Compliances: After a slow start, the no. of registered taxpayers who started complying with GST timelines, grows up. For the first month (July 2017), only 38 lakh out of 68 lakh registered taxpayers had submitted GSTR 3B returns by August 25. This figure has now almost doubled to 72.5 lakh by April 2019. E-way bill, an anti-elevation mechanism, came into existence from April 1, 2018. The number of e-way bills doubled from 2.8 crore in April 2018 to 5.49 crore in March 2019.

Percentage rationalisation: When the GST rates were first calculated, over 200 goods were kept in the 28% rate bracket. The number of goods under 28 per cent slab has been reduced to eight. There are other goods and services whose tax rates have been reduced. For example, GST on restaurant services has been brought down from 18 per cent to 5 per cent. GST rates on housing projects have been reduced from 8 per cent to 1 per cent and on non-affordable housing projects from 12 per cent to 5 per cent.

Number of returns: When the GST was rolled out, there was a provision for three monthly returns – for sales, for purchases and a composite return – and one yearly return. When businesses complained about huge compliance burden due to the requirement of 37 returns being filed in a year, the GST Council did away with the purchase return. Now businesses have to file two returns – GSTR1 for sales and GSTR 3B, a composite return.

The GST Council has now given a nod to a new system under which only one return needs to be filed from January 2020.

Contact Certicom for further details.