Finance Secretary Hasmukh Adhia today said the goods and services tax has entered a “smooth phase” within a year of its roll-out, with a “pretty good” tax compliance and the efforts will now be to simplify tax return forms.
The GST, the biggest tax reform since Independence, was rolled out on July 1, 2017, which subsumed over a dozen local taxes. It transformed India into a single market for movement of goods and services.
Over 1.11 crore businesses have registered themselves under the GST. The average monthly compliance of return filing and tax payment is going up in a staggered manner and after a period of time it is expected to be around 96 percent, Adhia said.
Adhia said the new indirect tax regime has reduced a plethora of taxes, removed cascading effect of taxation and state check-post, increased taxpayer base with much less possibility of evasion and brought about end-to-end electronic filing.
“Of course, for any new system there will always be initial glitches. These glitches were mainly on account of lack of information and so the moment the information gap was removed, people felt more comfortable. I think all the glitches are over and we are in a smooth phase of implementation,” said Adhia, who also holds the charge of revenue secretary.
On the focus in the second year of the GST regime, he said the tax officers were working on a single page return form which would be modular in nature and “user-friendly.”
“This year’s main agenda would be to implement the new and simple system of filing of returns,” he said.
On the critics saying the GST has not led to the intended formalisation of the economy, Adhia said the data suggested otherwise since the number of people coming into the tax net has gone up after the roll-out of the tax regime.
“Pre-GST there were 60-65 lakh businesses who were migrated and the remaining (almost 48 lakh) are all new. With these many new dealers or businesses coming into the tax net. If it is not formalisation, what is it?” Adhia asked.
He said 25 percent of the businesses who file GST returns have zero tax liability and hence file returns with a lag as there is very less penalty. “Compliance is pretty good. There is only delay in compliance. For July 2017, of the people who were supposed to file GSTR-3B, 93.63 percent had filed over a period. But if you take March 2018, 79 percent had filed. Over a period, all these percentages will be 96 percent,” Adhia said.
Elaborating on the simplified return form, Adhia said the one-page return form would be modular in nature. “So if you are B2C (business to consumer), many of the sections (in return form) will not be open for you at all. If B2C, then only one form will open, a small table. It will be user-friendly,” he said.
He said the return form would have two sections—a table to show tax liability and the input tax credit being claimed, and another part where there would be invoice-wise details to be uploaded in a tabular form which the B2B (business-to-business) has to fill.
The GST Council had in its last meeting on May 4 approved the design of new return forms. It was decided that the current system of filing summary returns (GSTR-3B) and final sales return (GSTR-1) would continue for six months. After that, a new return software would be ready.