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The Goods and Services Tax (GST) regime has witnessed a substantial surge in tax filers, showcasing a remarkable uptick in taxpayer compliance. According to recent data released by the Finance Ministry, GST return filers surged by approximately 65% to a staggering 1.13 crore within five years, up until April 2023. Simultaneously, active taxpayers registered under GST escalated from 1.06 crore in April 2018 to 1.40 crore, underlining a robust increase.
Enhanced Compliance Metrics
The ministry's data reveals a striking improvement in taxpayer compliance, with 90% of eligible taxpayers filing GSTR-3B returns by the end of the filing month in the current fiscal year. This stands in stark contrast to the 68% recorded during the inaugural year of GST rollout in 2017-18. This surge in compliance is attributed to the simplification of rules and procedures within the GST framework, fostering a conducive environment for taxpayers.
Ever since the nationwide implementation of GST on July 1, 2017, amalgamating various local taxes, the number of GSTR-3B filers has seen a substantial upsurge from 72.49 lakh in April 2018 to 1.13 crore as of April 2023. Notably, GSTR-3B serves as the monthly return form for reporting outward supplies and tax payments.
Financial Impacts and Trends
The financial implications of this upsurge in compliance are substantial, with the monthly GST collection reaching Rs 1.68 lakh crore in November. This marked the sixth instance where gross GST collection surpassed the Rs 1.60 lakh crore mark in the current fiscal year.
Finance Minister Nirmala Sitharaman highlighted a consistent upward trend in GST collection since its inception, averaging a monthly mop-up of Rs 1.66 lakh crore in the current fiscal year.
Compliance Challenges and Complexity
A PRS Legislative Research report acknowledges the pivotal role GST plays in the government's revenue stream, constituting nearly 60% of total tax collections. However, concerns arise regarding shortfalls in collection compared to initial projections, attributed to economic slowdowns and extensive exemptions within the system.
The multi-tiered GST structure, encompassing diverse tax rates and frequent rule modifications, poses a significant compliance challenge for businesses, especially SMEs, potentially impeding their growth and competitiveness.
Sustainability and Transparency
Cesses and surcharges employed to offset revenue shortfalls raise questions about the long-term sustainability and transparency of the GST system, according to the report.
The report highlights concerns about states' uncertain financial positions due to incomplete compensation for potential revenue loss caused by GST implementation. Integrating the informal sector into the formal economy through GST remains a gradual and challenging process.
Recommendations for a Stronger GST Framework
The report advocates streamlining the tax structure, rationalizing rates, and simplifying compliance procedures to alleviate the burden on businesses, particularly SMEs. Ensuring adequate state compensation and exploring alternative revenue sources are proposed for long-term fiscal stability.
By comprehensively addressing challenges while capitalizing on the positives, the GST framework can evolve into a more efficient and equitable tax system, driving India’s economic progress and fiscal stability.