Ever since its launch in July 2017, we have witnessed a sea-change in the applicability of the entire GST framework.
The Government has been proactive in agreeing to the industry’s demands and encountering technical glitches.
As a result, today’s GST looks smoother and simplified as compared to how it looked at the time of its inception.
In July 2019, when the Government celebrated the second anniversary of GST’s implementation, it also showed its eagerness in rolling out GST 2.0 for the benefit of the taxpayers.
GST 2.0 will not only see more accessible, crisp return filing system but a plethora of changes in the enforceability of provisions.
In the pre-GST era and even during its implementation, the experts drawn out several points while comparing Indian GST to GSTs applicable across the globe. However, the comparison wasn’t feasible back then since GST was in a nascent stage.
Now since it has settled well, it’s time for us to see through the GST acts applicable in other countries of the world.
Instead of drawing a direct comparison, let’s figure out some good and relevant points that Indian GST can pull out from other tax legislatures for ensuring smoother, easier compliances by the taxpayers. As the Government is keen on making the GST simpler for small and medium taxpayers, especially, these points will be beneficial for achieving the objectives.
Similar treatment of goods and services
In most countries, goods and services are considered similar commodities for the purpose of GST due to which the provisions reduce significantly.
In India, there are various categories such as goods, services and goods & services both. GST applies to each category differently.
Also, provisions like time and place of supply, treatment of input tax credit and even the threshold limit for registration differ in each case significantly, making the entire framework tedious.
India can work towards the similar treatment of goods and services to make the tax legislature simpler for businesses.
Single GST rate
While the Government is keen on reducing the current 5 tax rates, most countries have already adopted a single uniform rate of tax. In Australia, it’s 10% since GST’s inception, while Singapore charges 7% GST.
Taking a leaf out of the models adopted by other countries, India should also move towards a uniform rate of tax . It will resolve the confusions among taxpayers regarding commodity classification.
Track invoice issuance instead of matching invoices with e-way bill
In other countries, there’s no requirement of issuing an e-way bill before the movement of goods since it leads to more documentation. Instead, the authorities track every raised invoice to curb any tax evasion.
As India advances towards e-invoicing system, the issuance of e-way bills must be scrapped to reduce the unjustified formalities. Instead, the GST council can track every invoice that a taxpayer issues and match it with the details filed in GST returns.
Easier rules for imports and exports
Right now, the rules for imports and exports horrify the taxpayers since they have to flip through 100s of pages to determine the applicability of GST in specific cases.
Since many startups and solopreneurs are exporting their goods or services outside India or paying a subscription for software purchased from outside India, the rules must be made concise and crisp.
Instead of offering the taxpayers two options - either to pay IGST and claim for a refund or to file LUT for tax payment free exports, the GST council should make the exports entirely tax free. This way, the working capital of the businesses won’t get blocked.
Hassle-free allowance of GST Credit
When the Government implemented GST, it’s biggest advantage was the free flow of input tax credit across the supply chain, resulting in the lower cost of production. However, the Government has currently capped the GST credit at 20% for invoices not uploaded by the vendors. It is resulting in higher working capital blockage for the taxpayers.
Taking a leaf out of Australian GST, the Government should ease down the input credit norms so that the taxpayers don’t have to put their heads around the compliance and communication with vendors.
Overall, GST 2.0 focuses on most of these aspects already. However, the Government, tax law preparers and stakeholders should ensure that GST 2.0 makes the lives easier specifically for small and medium taxpayers who don’t have huge funds to spend on compliances.
If India wants to climb up in the list of “Ease of Doing Business”, simplicity in GST law will play a crucial role.