GST Focus Shifts to Enforcement Actions, Returns, Refund Simplification

GST Update

It faced a huge political backlash and became the butt of jokes with opponents calling it 'Gabbar Singh Tax', but weathered all of it in 2018 and its proponents are confident the GST is fast emerging as a strong tax-compliance tool and may eventually evolve into a single-slab taxation rate.

Dismissing the criticism that it was a 'good law, badly implemented', those in support point out it took two years for a GST to be implemented in Malaysia -- the last country before India to have introduced such a tax -- but only to be scrapped in the end by a new government there.

In India, it has been about one and half years since the GST (Goods and Services Tax) was introduced in July 2017.

Confident that the new indirect tax regime has stabilised now, the authorities feel it is time to reap the benefits now and therefore the focus has shifted to enforcement actions, as also streamlining returns and refund processes.


Confident that the new indirect tax regime has stabilised now, the authorities feel it is time to reap the benefits now and therefore the focus has shifted to enforcement actions, as also streamlining returns and refund processes.

The GST, which replaced a tangle of local taxes and entry levies, saw a chaotic roll-out on July 1, 2017, following a decade of political debate but only three months of concrete planning.



Like any reform, the GST faced its own teething troubles and the main opposition party Congress's president Rahul Gandhi famously called it 'Gabbar Singh Tax' -- after the famous villain of all-time Bollywood blockbuster 'Sholay'.

The opposition parties vehemently criticised the new 'one nation, one tax' system having four different rates instead of a single rate adopted in some countries including the UK and Singapore.

Then there were concerns about an onerous reporting system and frequent policy changes disrupting supply chains, and in turn consumption, requiring first few months being spent on streamlining the back-end systems, educating businesses and finding appropriate slabs between 0, 5, 12, 18 and 28 per  ..

It was finally in 2018 that the actual work on 'one nation, one tax' began to be seen with banishing of inter-state check posts with implementation of an electronic permit.

By mid-2018, tax collections rose in a country where compliance historically has been low. The tax-to-GDP ratio, which touched its highest level of 11.6 per cent last fiscal, is expected to rise further to 12.1 per cent this financial year ending March 2019.


Throughout 2018, a broad rationalisation of rates was carried out and after the last round last week only about two dozen goods were left in the top 28 per cent bracket, with officials saying essential and daily use items of commoners have been put in the lowest slabs.

However, a large part of the economy - fuel, electricity, land and real estate excluding construction contracts are still outside the GST, probably due to revenue considerations of both the central and state governments.


Also, many believe the real impact of the GST on the GDP growth rate hasn't yet been seen although it has made doing business in India easier as seen by the jump in India's ranking on the World Bank's index.

Inflation too has eased because of doing away of tax-on-tax that was levied in pre-GST era where states charged VAT even on the excise duty levied by the Centre on ex-factory price of goods.

Despite the political opposition, India has stuck to the GST while Malaysia scrapped its 6 per cent GST, fulfilling a campaign promise by Prime Minister Mahathir Mohamad that gave him an unexpected win earlier this year. The disgruntled voters there had blamed this consumption tax, imposed in 2015, for increase in their cost of living.

In India, officials say, the taxpayer base has swelled post-GST as traders can now claim certain tax credits only if they can show that every supplier in in the chain has paid the required tax.


An analysis of various changes in the tax rates through 2018 shows that the effective tax has come down on about half of the commodities. Besides, Finance Minister Arun Jaitley has dropped broad hints at moving towards a single GST rate although he had previously ridiculed the idea when it was proposed by Congress.

To ensure businesses pass on the tax rate cuts to consumers, an anti-profiteering authority has been set up which has already levied fines, including on big corporate like HU ..


Talking to PTI, Revenue Secretary Ajay Bhushan Pandey, the man now overseeing the GST after retirement of its main architect Hasmukh Adhia, said the focus now is on enforcement action and streamlining returns and refund process.

Further rationalisation of rates is also on cards, including in housing sector and cement, while an increase in exemption threshold for small and medium enterprises (MSME) would be considered by the GST Council next month.


Currently, businesses with a turnover of up to Rs 20 lakh are exempt from GST.

Monthly GST revenues have averaged Rs 97,100 crore in the April-November period of current fiscal, up from Rs 89,100 crore in the last fiscal.

Stating that the revenue department will ensure that honest taxpayers are not harassed, Pandey said the first step would be to identify only those defaulters where there are gaps in returns and which need to be clarified.

The government has detected GST evasion worth Rs 12,000 crore between April and November, while recovery stands at around Rs 8,000 crore.

Pandey said a continuous and constant endeavour under the GST would be to simplify the process, especially relating to filing returns, or claiming refunds, or rate rationalisation.

A simplified GST returns forms will be launched on a trial basis in April 2019 and will be made mandatory from July onwards. Also on the anvil is filing of 'nil' return by sending an SMS and online refund applications.

Stating that 28 per cent slab is "gradually moving towards a sunset", Pandey said going forward the slabs would be 0, 5 per cent and one standard rate between 12-18 per cent.

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