This Post discusses the perspectives of Arun Goyal, a retired Indian Administrative Service officer, who is now a member of the Central Electricity Regulatory Commission. Notably, he played a crucial role as an additional secretary during the GST Council’s launch of the Goods and Services Tax (GST), showcasing his deep experience in regulatory matters and commitment to driving impactful change in India’s economic landscape.
Six years after the implementation of the Goods and Services Tax (GST), it is evident that this reform, with its unique features such as the Dual GST structure and the Integrated GST mechanism, has indeed yielded substantial benefits for the Indian economy. The GST Council, functioning as a model of cooperative federalism, has facilitated decisions on tax rates, exemptions, and revenue-sharing, showcasing a collaborative effort between the central and state governments.
The commendable performance of the Goods and Services Tax Network (GSTN) in providing a seamless interface for taxpayers and governments has resulted in significant formalization of the economy. This is demonstrated by the remarkable increase in GST registrations, contributing to higher revenues. The growth from ₹8.76 trillion in 2018-19 to ₹13.25 trillion in 2022-23 is a testament to the effectiveness of the GST regime.
While the initial concept of invoice matching faced challenges, subsequent measures such as e-way bills and e-invoicing have been introduced to curb GST leakages. The standardization of electronic invoice formats and the adoption of these mechanisms have contributed to minimizing fraudulent GST invoices and ensuring proper claim of input tax credit.
However, it is essential to acknowledge that India’s GST system still faces certain concerns. The multiple tax slabs, particularly the high peak rates of 18% and 28%, have been critiqued for their complexity and potential to promote tax evasion. Comparing this to other countries with simpler GST structures, the need to reduce the number of slabs and peak rates becomes apparent.
The next phase of GST reforms should prioritize streamlining the number of tax slabs and reducing peak rates to achieve tax buoyancy, aligning with the positive trajectory observed in India’s direct tax rates. This approach will not only simplify GST administration but also enhance the effectiveness of the GST system in driving economic growth and reducing tax evasion.