A positive approach
The Goods and Services Tax regime, which is about to complete seven years, has long defied the initial criticisms that arose during its inception. However, there is still a significant scope for improvement, and, reassuringly, the indirect tax regime is consistently progressing in a positive direction. The 53rd GST Council meeting, held in New Delhi, marked significant strides toward easing the compliance burden on taxpayers and promoting trade facilitation.
One of the notable decisions was the exemption of GST on services offered by Indian Railways, such as platform ticket sales, retiring rooms, waiting rooms, cloakrooms, and battery-operated car services. This move is likely to simplify the travel experience and reduce the financial burden on passengers. The decision can potentially lead to enhancement of affordability and accessibility of the railways. The Council also exempted hostel accommodation services, provided they are outside educational institutions, and cost up to Rs 20,000 per person per month, with the stay not exceeding 90 days. This exemption is expected to benefit students and workers who rely on affordable lodging options, particularly in urban areas where accommodation costs are high. Yet another significant relief came in the form of a waiver of interest on penalties for tax demand notices issued under Section 73 of the GST Act for fiscal years 2017-18, 2018-19, and 2019-20. Taxpayers who settle their full tax dues by March 31, 2025, will benefit from this waiver, potentially reducing litigation and encouraging prompt tax compliance. India woke up quite late to the realisation that incentivising tax compliance, through different means, can broaden the tax net — resulting in enhanced and streamlined revenues for the government. It is time to step up to accelerated action in this direction. In a move to support businesses further, the GST Council extended the deadline for availing input tax credit (ITC) on invoices or debit notes. The council also agreed to roll out biometric-based Aadhaar authentication for all GST registrations across the country in a phased manner.
Several changes in GST rates were also recommended. The GST on all kinds of carton boxes was reduced from 18 per cent to 12 per cent, which will lower packaging costs for businesses. A uniform GST rate of 12 per cent was recommended for solar cookers and milk cans, regardless of their material. Additionally, all types of sprinklers, including fire and water sprinklers, will attract a uniform GST rate of 12 per cent. Additionally, the Finance Minister reiterated the Centre’s commitment to supporting states through timely tax devolution, Finance Commission grants, and GST compensation arrears. She also encouraged states to leverage the Centre's 50-year interest-free loan scheme for specific reforms. It is heartening to see Centre’s committed resolve towards financial federalism. This is the way to go forward if India is to attain full-fledged economic growth sans regional disparities.
These positives notwithstanding, there is a lot left to be done when the GST Council meets again after the Budget. The rationalisation of GST rates remains a critical agenda item. This includes addressing the inverted duty structure in sectors like textiles, footwear, medicines, and fertilisers, which hampers input tax credit claims, and the high GST rates on commonly used items such as cement and two-wheelers. Future meetings will also need to tackle contentious issues such as bringing alcohol and fuel into the GST ambit and reviewing the 28 per cent levy on online gaming. Setting up of GST tribunals and addressing the delay in input tax credit disbursement are another key areas of concerns. However, with all pros and cons, India is well set to consolidate an efficient indirect tax regime in future.
