Has GST Become a Boon or a Bane for Common Citizens?

The Goods and Services Tax (GST), introduced in India as a part of the 'One Nation, One Tax' initiative, was intended to simplify the tax structure and improve compliance. However, its impact has been a subject of debate, with some praising its benefits while others highlight its drawbacks.

Theoretical Benefits

From a theoretical perspective, GST is seen as a significant positive step for the Indian economy. It transforms the tax system into a consumption-based one, eliminating multiple points of taxation and reducing evasions. The unification of several indirect taxes under a single tax regime has been a major step towards simplification. According to proponents, such as the ex-Minister P. Chidambaram, it is a boon rather than a bane for the general populace.

Impact on Various Commodities

The initial impact of GST varied across different commodities. For example, the reduction in tax rates over the past two years has led to a decrease in prices, making goods and services more affordable for the common citizens. The Economic Times lists how GST impacts different sectors, indicating a general trend towards price reduction and increased competition.

Another benefit is the integration of input tax credit (ITC), which was previously available only for goods. Under the GST regime, businesses can now claim ITC for both goods and services, streamlining the tax collection process and reducing the overall tax burden on businesses.

Challenges and Drawbacks

Despite its theoretical benefits, GST has faced several challenges and drawbacks.

Implementation Issues

The implementation of GST has been marred by several issues. According to the Comptroller and Auditor General (CAG) of India, there has been a decline in compliance, particularly in the submission of returns (GSTR3B). For instance, the number of returns submitted dropped from 87 in April 2018 to 79 in December 2018. This suggests that many businesses are struggling to comply with the new tax regime.

The CAG highlighted that the provision for matching invoices between buyers and sellers, which is a key anti-evasion measure, was still not fully in place. This lack of compliance is seen as a major loophole, potentially leading to tax evasion and reduced collection.

Fraud and Implementation Challenges

Several high-profile cases of GST fraud have come to light, indicating that the new tax regime is not foolproof. On May 23, 2019, MBL, a company based in Gujarat, was raided by GST officials for alleged tax evasion. The managing director and other officials faced charges of faking input purchases worth Rs40 crore, indicating widespread fraud in the GST system.

Such instances of fraud are not isolated. The CAG has pointed out that several cases of fake invoices have been uncovered, leading to claims of input-tax credit of up to Rs177.64 crore. These cases highlight the challenges in ensuring the integrity of the GST system.

The Position of the Indian Economy in Global Taxation

The position of the Indian economy in the global tax landscape has been discussed in relation to the introduction of GST. While it aims to improve the tax collection mechanism, it is also expected to make the economy more competitive on a global scale. However, the effectiveness of GST in achieving these goals depends on how well it is implemented and enforced.

According to a report by the International Monetary Fund (IMF) and the World Bank (WB), the implementation of GST was done in accordance with their recommendations. This suggests that the Indian government took the necessary steps to align the tax regime with global best practices. However, the challenges highlighted by the CAG and the instances of fraud indicate that there is still room for improvement.

In conclusion, while the GST regime has brought certain benefits such as reduced tax evasion and a single tax system, it has also faced challenges in terms of implementation and fraud. Whether GST ultimately proves to be a boon or a bane for common citizens will depend on how these challenges are addressed.

Key Takeaways:

GST as a consumption-based tax has reduced multiple points of taxation and improved anti-evasion measures. Challenges in compliance and implementation have been highlighted by the CAG and high-profile fraud cases. Future improvements in the GST system are necessary to ensure its effectiveness and minimize fraud.

For more information on the Indian GST system and its impact, refer to the latest reports and guidelines issued by tax authorities and financial publications.