Finance minister Nirmala Sitharaman on Wednesday said that taxation, especially Goods and Services Tax (GST), needs to be further simplified to make life easier for tax payers, a critical requirement for a self-reliant nation.
In her message on the third anniversary of rolling out GST, Sitharaman said that more efforts were needed to further ease tax compliance, especially for small businesses. “The government is committed to continue reforms in future as well to facilitate tax payers," the minister said.
Sitharaman’s promise about simplifying the tax administration comes a day after Prime Minister Narendra Modi thanked tax payers along with farmers for strengthening the government’s hands in offering humanitarian support during the coronavirus pandemic.
Sitharaman also said that for Modi’s call to make the country self-reliant, tax administration, especially GST administration, will have a large role to play. “We must foresee the issues faced by our business community and proactively address the same to enable them to compete on a global scale," she said, adding that only by such proactivity can ensure much needed economic growth in future.
On 1 July 2017, GST replaced a complex web of central and state taxes with a value added tax system and unified the market by removing barriers at state borders. However, the technology driven tax system that sought to make economic activity more accountable faced several glitches and a backlash from small traders. The transparency in the tax system highlighted certain anomalies in tax rates and prompted the central and state authorities to lower rates on a host of items, mostly goods, which eventually affected revenue receipts.
Experts said that the improvements that GST brought in were creditworthy but challenges lay ahead. “This three-year journey has had ups and downs along the way, with frequent rate rationalisation, almost 700 notifications, 145 circulars and over 30 orders. Challenges exist in policy and procedural matters--ambiguity in anti-profiteering provisions, disputes on certain services qualifying as exports, denial of input tax credit for certain transactions and inverted duty structure. Having a truly world class GST can be critical for sustainable growth," said Saloni Roy, senior director at Deloitte India.