India should stabilise information technology infrastructure and consider reduction in multiple compliances under the Goods and Services Tax (GST) to ensure long-term successful implementation of the indirect tax regime, say several experts here.
Highlighting the now-abolished GST regime in Malaysia and the nearly 25-year-old continued implementation of the indirect tax in Singapore, they said India should now move towards further simplification of GST and timely issuance of clarifications considering the varied advance rulings.
Nirmal Singh, partner-GST at Nangia Andersen LLP, said policy makers have been engaged with stakeholders to iron out any impediment and are taking necessary steps to ensure smooth implementation and transition to GST.
“However, India should work towards stabilising IT infrastructure for GST compliances and also there should not be frequent amendments in GST laws besides effective and careful implementation of anti-profiteering law,” he suggested.
Citing the example of other countries, Singh said some of the reasons debated for abolition of GST in Malaysia were rising living costs, inflation and the perception of being not consumer/business friendly.
“As opposed to this, India has been able to manage these aspects,” he said.
According to Lau Zheng Zhou, research manager at the Institute for Democracy and Economic Affairs (IDEAS), Malaysia started GST effective from April 1, 2015 with the standard rate of 6 per cent.
However, GST was perceived to be broadly unpopular with the general public and had partly caused the defeat of the then government in the May 9, 2018 general elections.
“As promised in the election manifesto by the new governing coalition Pakatan Harapan, the GST was zero-rated on June 1, 2018 and subsequently replaced with sales and service tax (SST) starting September 1, 2018,” he said.
Referring to GST in Malaysia and Singapore, Lau highlighted the rebate system in Singapore to cushion the blow.
Asked what lessons could India draw from Singapore and Malaysia, he said compared to Malaysia, Singapore selected a low rate of GST to start off with, and a rebate system was also employed to soften the blow of the GST, which benefited lower income groups on an annual income of less than SGD 30,000.
Lau said the collection system is also facilitated by advanced information technology to help in the accounting of taxes.
According to Suresh Varanasi, partner at law firm AZB & Partners, India stands in a far better position in terms of implementation of the GST laws as compared to Malaysia.
“However, India should continue to simplify the technical processes/procedures relating to filing of returns and obtaining refunds to enhance the ease of doing business in India,” he said.
Varanasi said India should focus on rendering the process and procedures easier for the taxpayers and introduce greater stability in the GST laws in order to safeguard itself from a situation like Malaysia.
He said the unique structure of Indian GST laws would contribute significantly to the total revenue of India in the long term and would also enhance ease of doing business.
According to Gunjan Mishra, partner at law firm L&L Partners, for successful implementation of the GST, it becomes imperative that the GST rate is revenue neutral, and the legislation contain features to safeguard against undue increase in consumer price.
“Additional measures such as hassle free administrative and procedural mechanism leading to reduction in compliance burden for businesses play a vital role in smooth transition to GST regime,” she said.
Besides reduction in compliance burden, Mishra said, India must take measures to reduce tax cascading on account of specific exclusions and aberrations in the system. It should also streamline refund mechanism to reduce delays in refund claims, moderate unjustified price increases on account of GST and continue to address sectoral issues to make GST efficient and effective.
