Three years of GST

It has been three years since the introduction of Goods and Services Tax (GST), India’s biggest tax reform, on 1 July 2017. It has been a roller coaster ride for the government, industries, and consumers due to the amount of changes and reforms introduced in the past three years. These changes were primarily focused on rationalising rates, simplifying procedures, and curbing tax evasion. Stabilising one of the world’s biggest online tax systems, GSTN, was also a key focus area for the government.

Let us look at the following statistics and key indicators to know how successful this historical tax reform has been in achieving its desired objectives:

• Increase in tax base: After its implementation on 1 July 2017, over 38 lakh taxpayers migrated into the GST regime. This number had further increased to more than 64 lakh in September 2017. Also, with an addition of new GST registrations of over 58 lakh, this number has increased by almost 90 percent and we had total (new plus migrated) 1.23 crore active GST registrations, as on 31 March 2020. This growth indicates a significant increase in tax base and a change in taxpayers’ compliance behaviour.
  
  
• Revenue collections: While the first nine months of FY 18 saw a revenue collection of ~INR 7.4 lakh crore, FY 19 witnessed healthy growth with the government collecting ~INR 11.7 lakh crore. On the other hand, in the backdrop of rate reduction/ rationalisation over several products, the collections during FY 20 were below estimates and marginally grew at ~4 percent over FY 19 to reach INR 12.2 lakh crore.
  
  
• Introduction of e-way bill system: Barring the initial technical glitches, the e-way bill system has been largely streamlined. The total number of e-way bills (inter-state as well as intra-state) generated during FY 19 were ~56 crore; and with ~13% growth, this number increased to ~63 crore during FY 20.
  
  
• Rate rationalisation: The government continued to focus on rationalising GST rates. Although the overall rate structure remained same, a significant progress has been made in bringing down GST rates for various products. On 1 July 2017, ~19 percent items were under the 28 percent GST rate bracket; currently only 3 percent are subject to 28 percent GST. Now about 50 percent items are under the 18 percent bracket, ~21 percent face 12 percent, and ~25 percent are subject to 5 percent GST.
  
  
• Legislative amendments and clarifications: From its original shape and form, as on 1 July 2017, the GST law has undergone significant changes. With almost 700 notifications, 145 circulars, and over 30 orders, significant changes have been made to address taxpayers’ demand, to carry out procedural simplifications and curb tax evasion.