Promises aside, on the contrary, the tax revenue collection in the country, post-implementation of GST, witnessed a fall of over 40%, while the centre was made to pay GST compensation to states.
The implementation of Goods and Services Tax (GST) is all set to complete 5 years in July, but it has failed in achieving what the Government was eyeing to get out of it. While the sudden implementation was termed as a ‘masterstroke’ by the Government, it only did what the Demonetization did to the ‘Aam Admi’ but also ended up affecting the unorganized business sector on a large scale across the country.
People were expecting a great change after the implementation of GST while the Government was aiming to simplify the complex tax system prevalent across the country by scrapping several indirect taxes and bringing in a single tax pan-India. The GST was meant to simplify the tax collection but turned out to be so complex that it badly affected the economy of the country.
It is interesting to note here that the Government, as it was hurrying the implementation of the GST without any prior study, promised over a 2 percent increase in the GDP of the country and it was also said that the states would be able to increase their tax revenue collection by 14 percent. The GST might have been good for the country, but its implementation has turned out to be an utter failure. Promises aside, on the contrary, the tax revenue collection in the country, post-implementation of GST, witnessed a fall of over 40%, while the center was made to pay GST compensation to states—which was an extra burden.
By implementing the GST, bringing the indirect taxes down, the Government changed the federal structure of the country and the tax system was centralized in toto even as the PM Narendra Modi when he was the Chief Minister of Gujarat believed that without having a proper IT Network, the GST implementation would not be a success and that they would oppose the same. But things changed after that.
No doubt the Government wanted to bring uniformity in taxes, but the IT infrastructure in the country was not quite ready, or workable for the online tax filing which aggravated the situation further. It is to be noted here that without having an efficient IT infrastructure, the GST implementation was forced on the country even as the CAG has on record said that the GST failed to live to its full potential. All in all, it resulted in the tax collection witnessing a nose dive along with the country’s GDP.
There is a need for the Government—if it wants the GST to live up to its potential and turn out to be a success, which it is not presently—to strengthen the IT infrastructure so that the tax filing becomes easy across the country while as the corruption which still persists in tax collection also needs to be eradicated.
At the same time, there is a need for ensuring that the objective of simplified taxation is achieved by removing the complexities. What is more important is that there is a need for ending the trust deficit which remains between the Centre and States, particularly concerning the GST. Last, but not least, the Government needs to uphold cooperative federalism in the functioning and coordination of the center and states, which stands altered post GST implementation on July 1, 2017.