Centre may not reduce GST slabs drastically

NDA 2.0 may not see drastic structural changes in the goods and services tax (GST) as the focus may be more on administrative and compliance issues to reduce evasion and enhance tax revenues.

Experts DNA Money spoke to, do not expect the structure of the unified indirect tax system to alter much beyond collapsing its design from a four-rate slab to a three-rate-slab.

They believe the GST Council will concentrate more on driving better compliance to improve tax collection. For this, it will try to simplify returns filing and auditing process for taxpayers.

After introducing the electronic-way (e-way) bill, there are speculations that the government is looking at an e-invoice system that enables every transaction to be automatically registered on the GST Network (GSTN). The government is also looking to roll out the simplified single form returns filing system by July.

The GST Council is expected to meet for the first time after the new government is formed around mid-June.

Pratik Jain, partner and leader, indirect tax, PwC India, told DNA Money the first meeting may not be "agenda-heavy" and could be more "introductory" in nature.

He expected the Council to continue to pursue its agenda of plugging leakages in GST through "e-invoicing, data analytics and the crackdown on tax evaders".

Jain said there could be some rationalisation in GST rates as items like cement, air conditioner (AC) and others are moved from 28% tax slab to 18% slab. He also expects the GST Council to finally include fuels such as natural gas and aviation turbine fuel (ATF) in GST.

Even as he called on the government to work at "more stability and lesser aggression," he said the government is likely to continue to lay emphasis on tax collection and evasion.

"The government would focus on tax collection, evasion and simplification of compliances processes. From the industry perspective, of course, they would want more stability now, and hopefully lesser aggression on the ground by the authorities," he said.

Last fiscal, the government struggled to meet its budgeted GST target of an average of over Rs 1 lakh per month. It had estimated the total GST collection, by Centre and state, at Rs 13.48 lakh crore in FY19. They had fallen short of this target. For the current fiscal, the government is looking to mop up central GST (CGST) of Rs 7.61 lakh crore.

According to Jain, one of the areas that will need attention is strengthening of the GST dispute resolution mechanism. "The government should look at strengthening the dispute resolution mechanism. There are a lot of litigations relating to GST happening," he said.

Suresh Rohira, partner, leader – indirect tax practice –Grant Thornton, expects the number of rate slabs to be brought down to three from four.

According to him, if the GST rate on cement, which is currently charged at 28%, is brought down to 18%, the government would try to make for the loss of revenue due to it from other "areas".

The government has refrained from rationalising the GST rate on cement as it would reportedly result in a loss of Rs 13,000 crore to the government. GST collected on cement constitutes a major part of the total GST revenues.

"Cement contributes a major chunk of the GST revenues. So the government would do a balancing act if its rate is rationalised. If they reduce the rates of cement then definitely they would look at other areas for compensating the loss from it," he said.

Archit Gupta, founder and CEO of ClearTax, sees the GST 2.0 as old wine in a new bottle that will ensure better compliance to boost revenues in the run.

"GST 2.0 envisages a scenario where businesses manage and closely monitor their input tax credit (ITC) credit and work with suppliers for smooth ITC flow on a month-on-month basis. Sellers will continuously upload invoices, and buyers will accept/reject on the system. Initially, provisional credit will be allowed to help businesses smoothen out the credit process, giving them time to align with sellers. A systematic and phased implementation will help businesses adapt and help build better compliance leading to a boost in revenues in the longer term," he said.