India is now set to complete two years of the GST regime, the biggest tax reform since independence. The authorities are constantly working on improving the compliance structure in order to boost up the tax receipts.
Here are some of the proposals that the GST Council is going to discuss in the upcoming GST Council Meet.
The new and simpler tax return filing forms will make tax evasion harder as stabilizing revenue collection is the top agenda of the GST Council. Its medium-term agenda includes converging the two standard tax rates—12% and 18%—applicable on a large number of items somewhere in the middle as revenue collection improves.
There will be a decrease in the number of tax evasion cases with the use of technology and data gathered from various sources to its full extent. Large firms would be asked to generate invoices for B2B transactions on a designated portal. This will prevent the buyer from taking credits for taxes that the seller has never paid to the government.
Selling without invoices, often with the involvement of the buyer, and the retailer pocketing the tax amount collected from the buyer instead of remitting it to the government are the two ways of evading taxes at the retail level. Sale without an invoice will require inventory more than what is shown in the records. This is often done by using the same e-way bill multiple times. Officials plan to validate e-way bills with the data collected at toll plazas of movement of radio frequency identification-enabled vehicles will help check this problem.
According to the experts, indirect tax reforms have helped improve income tax and corporate tax collections as the transparency in sales achieved by GST makes it harder to hide income. Close coordination between the two streams of taxation helps officials connect the dots in a better way.
The combined monthly target of central and state governments for this fiscal is about ₹1.14 trillion. They collected just over ₹ 1 trillion in May, up 6.7% from the same month a year ago but below the monthly target. Revenue shortfall implies the center has to compensate states for their losses. The slow-moving pace of revenue growth means there is not much legroom for the GST Council to cut tax rates in the near future unless revenue receipts rise.