GST & Its Design
Goods & Services Tax (GST) is considered as one of the biggest ever indirect tax reform. It was aimed to improve the ease of doing business with a common set of laws across the nation and is expected to improve tax collections & curb evasions. GST is indeed a game changer but its implementation is based on an IT platform. It is the interface between taxpayer & the government.
Matching input tax credit was key under GST to check on tax evasion, however this functionality has not been enabled in the way it had been planned. GST has also increased the tax rate for service providers as well as increased their compliance burden. Moreover service providers have to take care of assessment for each state separately which is a divergence from the centralised filing system which was followed earlier. The government needs to consider taking states of board for a single return for service providers. A centralised system of assessment based on the principle place of business for Income tax purpose needs to be established.
GST is criticised for being a cult-tax structure, but such a structure is required with a country for a large middle class population. India is a vast country and having a single tax rate will not be able to consider the social structure. If the policy makers look to augment GST revenues they need to focus on simplifying the operational party & improve the IT infrastructure.