The implementation of the goods and services tax (GST) has made India a common unified market with just ‘One Tax’ on broad level by scrapping the web of taxes. From its very inception, it has seen many tweaks, various provisions were deferred on account of practical frictions faced by the taxpayers with the objective to make GST compliance easy and user friendly. The body heading the roll-out of GST in the economy, GST Council, has announced several steps to ease the compliance burden for small- and medium-sized businesses. The Council has taken major decisions like deferring return filing deadlines for both small and large businesses. Thus, allowing small businesses having turnover below Rs 1.5 crore to file quarterly returns by removing the requirement to file the GSTR-2 and GSTR-3, etc, till a simple mechanism is devised by the Council. Notably, even after taking numerous steps to make the compliance easy, tax base has seen a dip in the last few months. The revenue collection on account of GST for the month of October and November, 2017, stands at Rs 83,346 crore and `80,808 crore, respectively. This is a significant fall in the numbers as against the revenue collections for the months of July, August and September, 2017, which remained constant throughout the quarter, at an average of Rs 91,700 crore. The steep downfall is really worrisome as the same has also factored in the breach of fiscal deficit of the current financial year. The possible reasons for the downfall may be the rationalisation of GST rates of more than 175 items done in the month of November, initiation of refund to the exporters, higher claims of transitional credits, opening of larger turnover window for availing the composition scheme after the last date of mid-August, etc. As per the press releases from the finance ministry, approximately 58 lakh taxpayers migrated to GST till August and more than 18 lakh new registrations took place in the same period.
As per the information provided by the finance ministry to the Lok Sabha, till December 11, 2017, there are more than 95 lakh taxpayers registered under GST, of which around 33 lakh are new taxpayers. But the data suggests that only 53.06 lakh returns have been filed for November, thus indicating that more than 30% of the taxpayers are not filing returns, which is a summary return in form GSTR-3B. The compliance could not be up to the mark because key features of original drafted GST, such as invoice matching, e-way bills and reverse charge mechanism have been deferred, which could have played a vital role in curbing tax evasion. The leakage is mainly due to absence of these features as check on faulty taxpayers is difficult in their absence. Since GST, the biggest indirect tax reform, was implemented with an intention of increasing tax base along with creating more transparency and easy compliance procedures, anxiety among the Central Board of Excise and Customs officials and the government is genuine. It also indicates that there is a pressing need to find the evaders and requires strict action to plug revenue leakages.
The implementation of electronic-way Bill, a mechanism to track transport of goods will also prove to be a major control to check large-scale tax evasion, and it is hopeful that compliance will improve further in the upcoming fiscal year. In December and upcoming few months, we may also expect further dip in collection due to transitional credit filed on the last date in Form-TRAN-1, whose due date was December 27, 2017. After February, in March 2018, we can expect that collection would stabilise and the e-way bill, which is going to be implemented from the month of February for inter-state transactions, will keep a track of movements of goods. Therefore, tax evasion becomes difficult as all the transactions will be under the government radar. However, if the stabilisation of revenue does not happen and the downward trend of collection continues, we would see that there will be no further rationalisation of GST rates in near future and in that scenario, two-slab GST will be far away from the reality.