The Goods and Service Tax was introduced in India on 1 st, July 2017 with an aim to eliminate various multiple taxes which were an element of central and state government and to yield uneven tax systems everywhere in the nation. GST is a single tax on supply of Goods and Services from the manufacturer to the consumer. It is essentially a tax on value additions, as credits of input taxes paid at each stage are refunded in the subsequent stages. The final consumer bears only the GST charged by the last dealer in the supply chain.
The largest, most resolute tax reform in the country has its downsides. Months after it was implemented, the challenges have advanced from the disgruntlement of small traders to more fundamental issues like a stagnant growth of GST collections, the surfacing state-wide fake invoices racket and the failure to achieve a consensus on the rationalisation of rates and therefore, the inclusion of things like petroleum products and electricity within the GSTâ€™s ambit.
GSTâ€™s low revenue collection has put the State and Central Government in a difficult predicament. Meanwhile, several states have urged the 15th Finance Commission to increase the compensation period under GST beyond the mandated year of FY 2022. In line with Goods and Services (Compensation to States) Act, 2017, if a stateâ€™s revenue growth falls below 14% in a very year, the Centre would bridge the shortage for the primary five years. The compensation is given to the states once every two months out of a cess collected on taxes on sin and luxury goods.
The second challenge of the GST has the capacity to stagnate the total revenue. The input tax is a structure that enables businesses to obtain refunds on GST paid for the purchase of Goods and Services to impede descending taxation. The uncovering of input tax frauds has increased the stringency of the verification norms like linkage of Aadhaar to counter fake invoices and fraudulent refund claims thereby leading to a delay in returns. The delay in refunds is creating human interference, leading to an increased scope for corruption, and reducing the working capital for small organisations.
The third challenge in the way of the GST system is the non-inclusion of items such as petroleum products and electricity as well the lack of consensus on certain matters like a cutback on the number of rate slabs (main ones being nil, 5%, 12%, 18%, and 28%) and tackling of the argumentative dual-rate itemâ€”the lottery.
The GST model that was introduced in India on 1st July 2017 was an indifferent method by the government to organize the indirect tax structure of the country. GST has undoubtedly simplified the existing indirect tax system that helps to overcome the cascading effect of the tax. An in-depth study of the GST model framework around the world is required before the Government can implement it in the country.
It is clear that the economy is slowing down because of unforeseen employment of GST thus the disruptions may have advanced the decline. The sole possible remedy for this disruption is to make the transition to GST simpler and more inclusive for the country.
The Real Estate sector has witnessed amendments in the GST, click on the link below to view the document.