Headline – GST 2.O: is it the right time for its implementation? 

- GST 2.O: is it the right time for its implementation?

Subheadline – As the GST collection has turned robust —it is  an outcome of widening tax base and plugging of leakages — this is the right time to usher in the next phase of India’s most ambitious tax reform. So, what kind of reforms should be part of GST 2.0 the government is facing. 

The turbulent years of implementing the Goods and Service tax (GST), in India is finally getting over this indirect and transaction based tax, which was implemented nation -wide in July 2017 has been settled. 

Various issues related to it like the glitches in invoice matching and delays in refund which dragged on for years have largely been dealt with the continuous issue of states not receiving their mandated compensation during Covid – 19 too has been resolved. 

India will now observe a jurisdiction free Goods and Service tax (GST) regime as a part of the next five years old indirect tax system. New Delhi, which raised the import duty on gold recently, is not looking at any further administrative measures immediately to clamp down imports.

“The second aspect of administrative structure, which we need to sort of discuss is whether we still need a territorial jurisdiction, at least within CBIC…I think technology makes it possible for us to not be tied to a particular geographic location,” Vivek Johri, chairman of the Central Board of Indirect Taxes and Customs (CBIC). 

He said the recent decision on rate rationalization along with tighter scrutiny and better compliance will keep the monthly average GST collections high, between ₹1.35 lakh crore and ₹1.40 lakh crore.

The Board will take up the recommendations of the Group of Ministers on system reforms in the next four months, which will further improve the compliance of taxpayers.

On the rate of rationalization Vivek Johri said that “while the group of Ministers has yet to give its final reports on rate rationalization, the issue in my view is that you cannot have a rate rationalization unless some rates go up.” adding that this would mean re- slotting items under different slot rates. 

During this time, India has witnessed changes in effective tax rates and improved supply chain efficiencies. A tax regime founded on a technology-based monitoring system through e-returns, e-invoices, and e-way bills has been one of the biggest achievements of GST in India. It would also be important to laud the success of the Centre-State partnership under the aegis of the GST Council which has ensured that all policy decisions are implemented seamlessly across states.

“I think we need to seriously think about them because at one level technology makes it possible, but it requires a lot of discussion with the states…We’ll have to initiate that discussion,” he said.

For example, the physical verification of premises cannot be done remotely, but some functions can be handled better even if one is not present physically at the location.

“If rates have to go up or come down to achieve the revenue rate of 15%, then the timing is also very critical. Do we do it now when there are inflationary expectations in the economy or later… I think those are the kind of decisions the (GST) Council will have to take,” Johri said.

“.. maybe some beginning in that direction (jurisdiction-free and faceless assessment) … Even if we don’t go there fully or we don’t go for something like the faceless system right away, I think there is room for rationalizing the way we’re using manpower,” he said.

CBIC has already announced the online grievance redressal system, which will be fully functional in the next three months, he said. Even the timing of the exercise is important, he added.

The GST Council at its last meeting in Chandigarh decided to remove exemptions on multiple branded food items. The Board will take up the recommendations of the Group of Ministers on system reforms in the next four months, which will further improve the compliance of taxpayers.

Asked if administrative measures could be on the cards to check imports like restrictions on baggage in the past, he said: “In my view, they’re not needed right now.”

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