And it might be appropriate to look back at what the transition has entailed, if it has managed to bring even more enterprises under the tax bracket, whether the burden of compliance has been eased, and if streamlining of taxation has taken place in the manner intended. The Finance Ministry and the tax department refer to the GST as a ‘peerless success story’ emphasising that the pre-GST era entailed a high rate of taxes, which acted as a deterrent to paying tax. GST has contributed towards increasing compliance. In theory, the GST attempted to water down one of the most complex indirect tax systems globally into a transparent bottleneck free system.

In the pre-GST regime, a company keen on operating across India, would have to file nothing less than 495 different submissions to get the business up and running. Thanks to the GST, that number has been brought down to a fraction – 12. On the upside, GST runs on a four-slabbed structure, with most essential goods being exempted from tax. The factors that have worked in favour of GST include improving upon the ease of doing business, as traders and manufacturers could choose their suppliers in a region-agnostic manner. The removal of state border checkpoints has been a boost for logistics of business. Its importance was highlighted during the pandemic when essentials such as PPE kits and oxygen cylinders had to be moved en masse between states. The introduction of the e-way bill and e-invoice had also helped consignments move faster across territories and reduce the possibilities of tax evasion to a great extent by choking off fake invoicing.

However, like any other reform, the GST is a work in progress and not every aspect of it has been bathed in success as the Centre had imagined it to be. As of date, over 1,000 notifications have been issued by the Centre on account of amendments to the GST. The various tax slabs as prescribed by the GST Council had run into trouble on account of public opposition to the pricing of various essentials. It took almost a year-long protest for the GSTC to exclude sanitary napkins from the ambit of GST. Similarly, it took much brainstorming to move certain items from the 28 pc bracket into the 18 pc GST slab. For instance, lithium-ion batteries, domestic electrical appliances, cellphones, water coolers, paints and cosmetics are now taxed under the 18 pc slab.

A bone of contention has also been the exclusion of alcoholic products (for human consumption) and petroleum products from GST. Critics of the GST regime include the likes of PTR Palanivel Thiagarajan, the TN Finance Minister who had said last week that the implementation of GST was faulty and that it should be retooled and restructured. A case in point is the issue pertaining to input tax credit or ITC, which has been a pain point for taxpayers from day one. In the aftermath of the second wave of the pandemic, earlier in June, Thiagarajan had reiterated the demand to levy a 0% or 0.1% GST on COVID medicines, and essentials like medical equipment, PPE kits and masks.

Apart from this, states have also alleged that the Centre has taken up a significant portion of tax in the form of cess. In 2020, the GST Council had borrowed Rs 1.1 lakh cr to pay the states in order to make up for the shortfall. As of now, Rs 63,000 crore is pending with the Centre which it intends to disburse this year. The GST Council must look for ways to iron out systemic glitches that have plagued the framework since inception. It is also imperative that the GSTC seeks the counsel of states when it comes to the tax levied on essential products and services that will be a mainstay of a robust post-pandemic economy.