and Services Tax, which is considered as one of the most significant change in
the recent history, has failed to live up the expectations on multiple fronts.
However, some experts believe that one needs to take all facts into account before jumping to a conclusion.
Let’s analyze a few of the significant points raised by the CAG in its latest annual report
Invoice Matching: CAG pointed out that a system to match invoices of buyers and sellers to curb tax evasion was still not in place. It also pointed out that the Information Technology System, which forms the backbone of the GST network had glitches which made the return filing system complex and a serious lack of co-ordination rendered the tax compliance system non-functional.
According to experts, invoice matching forms an important part of the GST structure. However, the GST Council acknowledged that compliance with this requirement will be a cumbersome task for the tax payers in the initial phase.
If we compare the post-GST era, none of the central taxes had invoice matching. Even though some states had invoice matching in VAT, it was but limited to detection of possible cases of fake Input Tax Credit (ITC).
Presently, GSTR 1 and GSTR 3B provide invoice matching and the new system, which is being implemented in phases, is aimed at providing for more and more invoice matching.
2 – Decline in revenue: The CAG observed that post implementation of GST, the revenue on goods and services (excluding central excise on petroleum and tobacco) had declined 15 per cent in 2017-18 compared to the revenue of subsumed taxes in 2016-17.
to the experts, it is important to take into account the rate reductions that
happened upon implementation of GST. Also, once cannot ignore the compensation
cess while comparing revenues.
An increase in the number of return filings is an important part of the tax structure, but one cannot ignore the fact that the number of tax payers which was approx. 60 lacs in the pre-GST era has now increased to around 1.18 crores.
– Multiple tax rates:
The CAG had pointed out that goods and services of the same nature have been
subjected to multiple tax rates.
For example, different rates have been levied on hotels and lodges for different room rents. There is no GST for rent up to ₹1,000 per day. Rent between ₹1,000 and ₹2,499 is taxed at 12%, rent between ₹2,500 to ₹7,499 is taxed at 18% and GST on rent above ₹7,499is 28%.
However, according to the experts, the GST Council is well aware of this situation and it did not find any rationale in having the same rate for a room in a small lodge and that in a five-star hotel.