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Seven Years of GST: Its Adoption has been a Remarkable Success
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The Goods and Services Tax (GST) was implemented in India on July 1, 2017, aiming to create a unified tax system and eliminate inter-state barriers to trade. Over the past seven years, GST has transformed the tax landscape, improved compliance, and increased revenue collections.
Impact on Revenue Collection and Compliance:
- Significant Increase in Collections: Monthly gross collections have surged from an average of ?0.9 trillion in the initial phase to ?1.5 trillion, with May 2024 reporting collections of ?1.73 trillion.
- Widening Tax Base: The adoption of GST has led to a widening of the tax base, increased compliance, and reduced tax evasion through better enforcement and technological integration.
- Role of GST Council: The GST Council, India's largest and most successful Constitutional body, has played a pivotal role in guiding and shaping GST, making most recommendations through consensus.
Key Features and Achievements of GST:
- Digitalization: GST has embraced the 'Digital India' initiative, with all processes from registration to compliance and filings being conducted online via the GSTN portal. This digital approach has enabled efficient data analytics and fraud detection.
- Simplified Tax Structure: GST subsumed 17 taxes and 13 cesses, simplifying the tax regime and eliminating inter-state trade barriers. This has improved ease of doing business and enhanced supply chain efficiencies.
- Input Tax Credit System: The seamless set-off system of GST has nearly eliminated the cascading effect of taxes, leading to operational efficiencies and cost savings across various sectors.
Challenges and Areas for Improvement:
- Legal Amendments: The GST regime has seen over 250 amendments to the Central GST Act and more than 500 changes to central rules, reflecting the government's intent to continually improve the law.
- Dispute Resolution: The absence of an operational GST Appellate Tribunal (GSTAT) has led to a backlog of litigation and burdened high courts. The establishment of GSTAT is expected by the end of 2024.
- Expansion and Inclusion: Including petroleum products and natural gas under GST could increase collections and reduce the cascading effect of taxes in major consumption categories.
UPSC Mains Questions:
Q. Evaluate the impact of the Goods and Services Tax (GST) on India's economic integration and ease of doing business over the past seven years. Discuss the challenges faced in its implementation and suggest measures for improvement.
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