India Inc. Applauds GST’s 7-year Journey, Urges For Key Reforms

About 84 percent of India Inc. has expressed strong support for the GST implementation and has called for progressive steps to take the regime to a new level.

According to Deloitte India’s third edition of the GST@7 survey, confidence in the reform has significantly increased from 59 percent in 2022 and 72 percent in 2023 to 84 percent in 2024.

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The survey highlights the areas where more reforms are required; these include rationalising tax rates, offering an effective dispute resolution process, removing credit restrictions, adopting faceless assessments, liberalising export rules and implementing a compliance rating system.

Some of these crucial recommendations are expected to be key discussion points at the upcoming GST Council meeting on June 22, 2024.

Marking the seven-year journey of GST, Deloitte India surveyed to capture India Inc.’s views on this transformational tax reform.

As per the survey, 88 percent of the top C-suite leaders indicated areas of challenge, including aspects around audits and assessments, underscoring the need for continued simplification, technology integration and capacity building.

There is also widespread feedback for enabling effective dispute-resolution mechanisms, with 91 percent of leaders endorsing the extension of audit timelines to address issues and improve compliance.

Additionally, more than 70 percent of respondents advocated for aligning pre-deposit requirements for GST appeals with the pre-GST era norms, aiming to streamline the dispute resolution processes.

Mahesh Jaising, partner and leader, Indirect Tax, Deloitte India, said, “ The survey reveals that it is time to push for further reforms to make the regime more robust, dynamic and responsive to taxpayers’ needs. GST 2.0 should review the possibility of expanding the GST regime’s tax base, rationalising tax rates, removing ITC restrictions, further export liberalisation for services, unlocking working capital and addressing concerns related to operational areas of compliance.”

MSME Boost

To support the Micro, Small and Medium Enterprise (MSME) sector, the survey suggests easing GST registration by implementing streamlined processes, such as virtual verification and standard documentation across the country. These measures can help MSMEs effectively navigate compliance challenges and contribute more robustly to India’s economic growth.

Jaising added, “78 percent of MSMEs have shared a positive sentiment towards GST implementation this year versus 66 percent in 2023. Nearly 70 percent of respondents continue to believe that the quarterly filing of returns for MSMEs is beneficial and improves compliance. Specifically, the key positive area for 70 percent of MSMEs has been called out to be supply chain efficiencies.”

“Key initiatives sought by MSMEs are paperless invoicing and that uniform registration guidelines across India will significantly ease compliance burdens. Matching concept challenges of MSMEs in 2023 were at 64 percent and are now down to 37 percent, indicating that this area is more streamlined now,” Jaising said.

The survey highlights the profound influence of GST on various sectors, with competitive pricing of goods and services recognised by 73 percent of respondents as one of the most significant positive outcomes. Automation of tax compliance continues to be voted as a top performance area by industry leaders, followed by enhanced stakeholder engagement and the issuance of clarificatory circulars/instructions.

Summary;

• The survey highlights areas which have resulted in growing confidence on GST, specifically on positive role of GST automation/ technology & consultative environment, in GST policy-making;
• Growing confidence in GST: About 84 percent of respondents reported a positive perception of GST in 2024, up from 72 percent in 2023 and 59 percent in 2022.
• Key business benefits: About 73 percent of respondents cite competitive pricing as GST’s greatest business operational benefit

Top performance areas

• Automation of tax compliance, including e-invoicing, continues to be voted as a top performance area.
• Enhanced and continued stakeholder consultation, leading to the issuance of clarificatory circulars/instructions
• India Inc. recommends the following as focus areas for GST 2.0 reforms
• Rationalising GST rates, including addressing the inverted duty structure
• Enabling a swift and effective dispute resolution mechanism
• Removing ITC restrictions
• Unlocking working capital measures
• Promoting exports by further liberalising export rules, particularly for services
• Streamlining audits and assessments