Goods and Service Tax (GST) was introduced two and a half years back replacing various indirect tax laws like excise duty, service tax, value-added tax, etc. It also saw the creation of GST Council, which brought both the Centre and state governments on to a common platform for deciding changes in the law, rate of taxes etc. This has resulted in having a uniform indirect tax law across India. Now eyes are on what could be the key themes/trends to watch out for in the next couple of years.
Extensive use of technology
Introduction of GST has seen extensive use of technology by the tax authorities to administer the laws. Technology has been fulcrum of compliance. There has been considerable emphasis on seeking detailed information relating to procurements, sales, etc, to introduce transparency and plug the revenue leakages.
Initiatives like filing of GSTR - 1 for submission of invoice-wise data, and the use of electronic way bill for movement of goods have been successfully implemented. Several other initiatives are in the pipeline - like the introduction of electronic invoicing - where the invoice number will be generated by a central system having unique identification codes, online matching of input tax credits whereby the input tax credit will be available only when the supplier uploads the supply invoice on the GSTN portal. This would enable tracking of GST paid by the supplier as well as tackle the menace of fake invoicing.
There is an increasing reliance on technology to meet compliance requirements. It has necessitated behavioural and operational changes at the organisation level for the tax function. The tax has taken centre stage at the board meetings like never before!
With the vast amount of data at its disposal, the tax department is making use of data analytics to identify defaulters, fraudulent transactions. It is getting increasingly difficult, if not impossible, to avoid detection and one can see instances of such frauds being detected much earlier than before!
The availability of data at a granular level could also have ripple effects in compliances in other laws like income tax. Increased co-operation by sharing of data between various departments is fast gaining traction. The Centre is also investing in building new technologies and incorporating artificial intelligence to monitor compliances.
Will GST Council decision making remain unanimous?
The GST guarantees an increase in tax collection by 14 per cent year-on-year for the states in the next five years. The assurance by the Centre was necessary for obtaining the states' agreement to join the new tax regime and not operate outside its framework. The Indian Constitution has divided the powers for the collection of taxes between the Centre and the states for different domains. Obtaining concurrence of the states was vital for uniform application of the new law across the country. In this assurance lies the future of the GST. The GST Council provides the platform for achieving consensus between the Centre and the states on all GST-related matters.
For decisions to be taken at the GST Council, there are provisions to adopt voting in case of difference in opinion. So far, the GST Council's decisions have been taken unanimously, except the recent case relating to the fixation of tax rates for the lottery. It would be interesting to watch this space and see whether voting would continue to remain an exception or become a rule going forward.
Rejigging GST rates
This year's GST collection has been below the budgeted amounts, which may lead to a significant shortfall in the collection. With another round of increased compensation to the states kicking in the next financial year, can the GST Council rejig rates to augment tax collection? While the government is focusing on increasing compliances to bridge the gap, if it does not yield the intended results, who knows what lies in future?
The author is a partner with tax consulting firm Dhruva Advisors. The views expressed are personal