10 in chart: How GST has evolved over the last 5 years – Times of India

New Delhi: On July 1, 2017, the Center had introduced a major reform in the indirect taxation system in India in the form of Goods and Services Tax (GST).
Five years later, the tax regime is said to have played a key role in defining India’s economic structure and empowering businesses by integrating 17 taxes and 13 cesses into a ‘one nation, one tax’ structure.
The GST revenue collection of the Center is much higher today than what it was initially. At Rs 1.44 lakh crore, the gross GST collection in June is the second highest after April when it was around Rs 1.68 lakh crore.
This is the fifth time that the monthly GST collection since its inception has crossed the Rs 1.40 lakh crore mark and is the fourth consecutive month since March 2022.

Speaking at the GST Day celebrations on Friday, the Finance Minister Nirmala Sitharaman Said that within 5 years of its implementation, GST is showing its potential and Rs 1.40 lakh crore is now “roughly the bottom line” for monthly revenue collection.

However, the structure faced many challenges in the last 5 years and it is still evolving, trying to be more transparent and easier for the taxpayers.
Even though the tax has brought about a paradigm shift in the use of technology to ensure tax compliance, there have been many hits and misses in the last 5 years.
In other words, it is still a work in progress. There is still a long way to go to realize the full potential of GST and make it a truly ‘good and simple tax’.
Journey to Implement India’s Biggest Tax Reform
GST was first announced in the Union Budget 2006-07. Since then the Empowered Committee of Ministers has worked on the background material and preparation of the draft Act.
Finally, the implementation happened with the passage of the Constitutional Amendment Act in September 2016, which was followed by state legislatures. Subsequently, GST was implemented from July 1, 2017.
GST Council It was constituted as a constitutional body to make recommendations to the Union and State Governments. It has been found 47 times so far.

Taxes at both the central and state level subsumed under GST (1)

The then Finance Minister Arun Jaitley, who was instrumental in introducing GST in India, had said that the new regime would prove to be both consumer and assessee friendly.
The finance ministry had claimed that every minute detail of every item sold would need to be uploaded digitally in the central tax database for all businesses.
In the pre-GST era, the Center could tax goods up to the production or manufacturing level, while the states collected tax on the sale or distribution of goods. Services can be taxed only by the central government.
However, GST provided for both the Center and the states to tax the entire supply chain from production to distribution in goods as well as services. A centralized system for filing returns and uploading challans also means reduction in tax evasion.
Even though it eliminated the need for businesses to remember, keep track and pay for each separate tax, governance had its own challenges for taxpayers.
The website of GST has crashed several times, making it difficult for taxpayers to file returns on time. Furthermore, the complex structure of compliance has made it even more challenging for business owners.
Small businesses and micro, small and medium enterprises (MSMEs) suffered the most as the transition to the new system proved to be a costly affair. From adopting computer systems for filing returns to hiring a Chartered Accountant (CA) to understanding the process involved and filing returns, which led to an increase in expenses.
Over the years, the government has been continuously issuing circulars and clarifications to remove doubts regarding taxation under GST and to ensure ease of doing business. The Center has largely achieved its objective of One Nation, One Tax.
Recently, the GST Council in its 47th meeting in Chandigarh decided to ease compliance for small taxpayers making supplies through e-commerce platforms.

Taxes at both the central and state level subsumed under GST (5)

center-state relations
Under this arrangement, both the Center and the states come together in the GST Council to work out the modalities for smooth functioning.
When GST was implemented, states were promised compensation from the cess fund for five years if their GST collections fell short of the compounded revenue growth of 14 per cent. This shortfall was to be funded through additional taxation (compensation cess) on sin/luxury goods.
However, due to slowdown in economic activity as a result of the COVID-19 pandemic, the cess collection declined in FY 2010 and increased further in FY 2011.
In October 2020, the government borrowed Rs 1.10 lakh crore from the market in lieu of compensation cess for shortfall in its revenue in FY2011.
In addition to the compensation of Rs 1.10 lakh crore, the Center also provided Rs 0.91 lakh crore from the GST Compensation Fund to the states in FY2011.
The states now want the government to pay the GST compensation for an additional five years (after June 2022).
A recent report by SBI Research states that the GST compensation for some states as a percentage of the state’s tax revenue exceeds 20 per cent. However, many of them are offering free facilities like farm loan waiver, restoration of old pension system, etc., which are financially unstable considering the financially poor condition of many states.
“Clearly, states are currently living beyond their means and it is imperative that states rationalize their spending priorities in line with revenue receipts,” the report said.

where do you stand today
Under GST, a four-rate structure that exempts or levies a lower rate of 5 percent on essential goods and a top rate of 28 percent on cars. The other slabs of tax are 12 and 18 per cent.
In the pre-GST era, an average of 31 per cent tax was payable to the consumer from the total VAT, Excise Duty, CST and their wider implications.

Taxes at both the central and state level subsumed under GST (3)

In addition, there is a special rate of 3 per cent for gold, jewelry and precious stones and 1.5 per cent for cut and polished diamonds.
Cess is also levied on the highest tax slab of 28 per cent on luxuries, sins and demerits. The collection from the cess goes to a separate fund – the Compensation Fund – which is used for revenue loss to the state due to the GST rollout.

The GST Council also decided to ease the process of intra-state supplies made through e-commerce portals. Now such suppliers will not be required to obtain GST registration if their turnover for goods and services is less than Rs 40 lakh and Rs 20 lakh respectively. It will be effective from January 1, 2023.
The Council has also decided to constitute a Group of Ministers to address the various concerns raised by the States with regard to the constitution of the GST Appellate Tribunal and to make recommendations for appropriate amendments to the CGST Act.

Taxes at both the central and state level subsumed under GST (4)

impact on GDP
The recent jump in GST collection is being said to be a good sign of the economic recovery as well as the tax performance of the country.
However, if we look at the Gross Domestic Product (GDP) of India, the comparison shows that the growth in GST collection is not that significant.
In fact, India’s annual GDP was growing at a steady pace till FY2017, when it stood at 8.26 per cent. From that year onwards, economic growth began to decline.

It is to be noted here that the fall in GDP was not only due to the implementation of GST but also because of another surprising move by the Centre, which was called demonetisation in 2016. As a result, GDP growth fell to 3.74 per cent for FY20 with 2 back-to-back reforms announced.
The next 2 years were spoiled by the covid pandemic. GST collection was at its record low and so was India’s GDP. However, with the gradual resumption of economic activities, the pace of growth picked up and now India is poised to emerge as the fastest growing major economy.
what is expensive what is cheap
In the recently concluded GST Council meeting, chaired by Finance Minister Nirmala Sitharaman and attended by state finance ministers as members, it was decided to do away with exemptions and fix inverted duty structure for several items. . The change in tax rate will be applicable from July 18.
In other words, after the rate rationalization request was approved by a group of states, resulting in tax changes, the same request was extended for 3 months by another panel of state FMs.
Pre-packaged and labeled wheat flour, papad, paneer, curd and buttermilk will attract 5 per cent tax.
The abolition of exemption would mean that pre-packaged and labeled meat (except frozen), fish, paneer, lassi, honey, dry legumes, dried makhana, wheat and other cereals and murmuri (muri) would now attract 5 per cent tax. ,
Similarly, 18 per cent GST will be levied on Tetra Pack and will be charged by banks for issuance of checks (in loose or booked form). Maps and charts including atlas will incur a fee of 12 percent. Unpacked, unlabeled and unbranded goods will be exempt from GST.

Apart from this, 12 per cent tax will be levied on hotel rooms costing less than Rs 1,000 per day. At present it comes under the category of exemption.
5 per cent GST will be levied on hospital room rent above Rs 5,000 per day (excluding ICU).
The tax rate on products such as printing, writing or drawing ink has been increased to 18 per cent; Knives with cutting blades, paper knives and pencil sharpeners; LED lamps, drawing and marking devices.
Solar water heater will now attract 12 per cent GST as compared to earlier 5 per cent.
Taxes on certain services such as work contracts for roads, bridges, railways, metro, waste treatment plants and crematoriums will also increase to 18 per cent from the current 12 per cent.
However, the tax on transport of goods and passengers by ropeway has been reduced to 5 per cent from 5 per cent and on ostomy devices from 12 per cent.
Hiring trucks, freight, where fuel cost is included, will now attract a lower rate of 12 per cent as against 18 per cent.