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How tax compliance has evolved in India since GST's rollout
October, 07th 2019

In the 24 months since its implementation, there have been many promises that have been made, many that have been met, and for some, still a distance to travel.

It has been just under 36 months since the parliament passed the amendments required to bring in the promise of a simpler and more effective indirect tax system, GST. In the 24 months since its implementation, there have been many promises that have been made, many that have been met, and for some, still a distance to travel.

The introduction of GST was meant to help businesses more easily access the true market potential that India has to offer by introducing a single indirect tax framework as opposed to the prior state and central tax frameworks. This opening up of the market would make it easy for businesses to sell across state borders, truly making us one nation, paying one tax. The second promise that came with GST was to reduce the tax on tax burden - since many businesses would pay both state and central taxes, as goods and services would move to the customer, there was a ‘tax on tax’ effect that increased prices which needed to be corrected. Largely speaking, both these promises have been met - we are one nation mostly paying one indirect tax, and most goods and services have no tax on tax burden, reducing end price to the consumer.

In addition to this however, there have been expectations to simplify the overall tax structure that existed, too many brackets, too many rates. In addition, the rules and procedures that governed how a business can remain compliant were also expected to become easier than before. And with the proposed construct, the tax paying base was to increase too - increasing the revenue collections from indirect taxes over a period of time. A win, win, both for business as well as the government.

India remains a diverse and complex country, and navigating the required amendments, rules and procedures, and systems to make all these come alive as expected would take time to come alive.

We are continuously seeing reduction in brackets, and simplification of the rate structure almost every few months.

The current rules and procedures have undergone several modifications, and with the introduction of the e-Invoicing requirement, and upcoming new return formats, several businesses will have 3 systems that need to be complied with. We can simplify this to just one system since the concept of using the Invoice (or similar documents) form the basis of the GST return. By focusing on introducing the proposed new return format, re-examining the need for the eWay Bill and eInvoicing proposals, the compliance process for businesses can become easier.

Looking at the next few months, one hopes to see our government impose greater trust on Indian business, by simplifying the compliance process, and by placing the right checks and balances, the increasing tax net and compliance levels will certainly lead to increase in tax revenues as well.

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