Goods and Services Tax was implemented on 1st July 2017, bringing in sweeping changes to the indirect taxation regime in India. While there were presumably a lot many benefits such as streamlining of credit, elimination of multiple taxes, ease of compliance, it surely also led to a huge resistance from the people. This resistance is understandable when such a huge change is brought about in a country such large and diverse as ours. Today, after almost three years, the GST regime has stabilized to an extent and over the past year, GST Council has been focussed on further ironing out the difficulties being faced by the taxpayers. It has been quite successful with revenues constantly hovering around one lakh crore mark over the past few months.
Now, the advent of coronavirus and its fallout has brought immense challenges for all sectors, especially for GST as it is the foremost tool of the governments to bring in revenue receipts. Acting in a pro-active manner the government has already deferred the GST Return filing due in March-June period to 3oth June 2020. This has brought in much relief for the taxpayers but it has also surely rattled the government finances. For the FY 2018-19 year, the government netted a total of Rs11,77,370 Crores whereas for the FY 2019-20 total collections stand at Rs12,22,131 Crores showing a Y-o-Y growth of 3.8 percentage points. But, a specific instance to point out here is the collection for the month March 2020 which stood at Rs97,597 crores with a 8.4% dip compared to last year’s collection. These are pre-lockdown period collections and therefore the situation will become worse for the upcoming months. Even by conservative estimates, the collections for first quarter of 2020-21 will see a 70-80% dip in the GST revenue. Therefore, it is of utmost importance that the economy is slowly brought back on track or else the government fiscal budget will be seriously hit with a deathly blow.
The expectation is that this revenue dip will be compensated for when the taxpayers will file their cumulative Returns for the first quarter near 30th June i.e. the deferred date. Still, there can be no compensation for the period when companies have been completely non-operational due to the lockdown. Amidst all this, the government is also expeditiously sanctioning refunds to the taxpayers to ease their cash flows and provide a healing touch to struggling industries.
Further, going forward, this coronavirus challenge should surely make the government act expeditiously on the GST reforms which have been in the pipeline for quite a while now. This is the time to rationalize the tax rates and simplify the tax slabs, bringing them down to at most three rates and no more. Further, the inverted duty structures need to be reviewed and corrected to enable taxpayers smooth credit flow and ensuring that their capital is not stuck in refund applications with the government. Also, there needs to be a comprehensive review of the Return filing procedure and these need to be simplified and actively deployed. Other than making it easier to file returns, this will ensure a much-needed increase in the tax base which is required when the regular taxpayers will not be paying as much due to the slowdown in the economy. There have also been talks to bring in petroleum under the GST regime but with states all over India facing crucial cash crunches, it is difficult to imagine that they will be willing to give up a fiscal tool still in their hands.
At the same time, the government needs to up its guard against evasion because such hard-times will make push some businesses to opt-in for unlawful means for tax evasion. This enforcement, while definitely on ground, should be enabled to the maximum extent by Big Data analysis and use of AI tools. Ministry of Finance has already deployed such tools and these need to be strengthened further to capture and mitigate the increased risk of tax evasion in coming times.
In essence, the businesses all over are going to be staring at huge losses. While the resilience of Indian taxpayers will surely overcome such difficult situations, the administration will also have to lend a helping hand. The need of the hour is to implement the law with a touch of humanity and help the taxpayer to the maximum possible extent. This will build the much-required trust factor and encourage taxpayers to pay their dues honestly. In all this, the role of tax consultants also becomes equally important who have to guide and help the businesses navigate through these tough times. Special sessions of the GST Council should also be taken up for exhaustive consultation with the stakeholders and it must be ensured that all their problems are solved to the maximum possible extent.
The coronavirus has surely brought along challenges which were unseen a few weeks ago and has put a lot of our plans in jeopardy. Still, history shows us that only those who dare to create opportunities out of such dire situations are the ones who conquer the world. Such are the times today when the global system has been shaken up and it is time that together we all create robust and resilient financial systems which are able to stand amidst all difficulties in times to come. Much needed changes in GST are surely a step forward in this systemic change.
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