The Goods and Services Tax (GST), introduced in India in 2017, is characterized by multiple tax rates and a compensation cess on certain goods The structure, which was largely designed to maintain revenue neutrality, has been deemed counterproductive
High GST rates have led to an increase in tax evasion and fraud.
Key Issues involved in the GST Regime
Multiplicity of Tax Slabs: One of the persistent challenges with the GST regime is the multiplicity of tax slabs.
The GST regime in India is characterized by multiple tax rates and a compensation cess on certain goods.
It, largely designed to maintain revenue neutrality, has been deemed counter-productive.
Compliance Burden: While GST is intended to simplify tax procedures, the compliance burden on businesses has increased significantly.
Frequent changes in tax returns and reporting requirements have turned out to be a compliance nightmare.
Delayed ITC Refunds & Penalties for Belated Filings: Delayed Input Tax Credit (ITC) refunds and penalties for belated filings are other significant issues faced by taxpayers.
Ambiguity in Anti-Profiteering: There is ambiguity in the anti-profiteering rules under the GST regime.
These rules are intended to ensure that businesses pass on the benefit of reduced tax incidence to consumers.
However, the lack of clear guidelines has led to confusion.
Technical Glitches in GST Portal: The GST portal has been a puzzle and cause of concern for many taxpayers since its inception.
Harmony between the provisions of the law and the functionality offered on the GST portal remains elusive.
Single Tax Rate suggested by Vijay Kelkar
Vijay Kelkar suggested switching to a single tax rate of 12% and sharing revenues with local governments and municipal corporations
He argued that the genesis of the current GST fraud lies in the very structure of the GST rates.
High rates of GST make it lucrative for fraudsters to evade taxes.
A single GST rate of 12%, with revenues shared equally with all tiers of the government and Union Territories, should be introduced at the earliest.
Benefits of a Single GST Rate
Most developed and emerging market economies have a policy of a single GST or Value Added Tax (VAT) rate on goods and services.
Countries with a single rate and simple GST or VAT laws have been successful in optimizing tax revenue and minimizing tax disputes.
Of countries with GST or VAT systems, 80% have opted for a single tax rate, including Singapore, New Zealand, the United Arab Emirates, and Japan.
Conclusion
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