With more than half a decade presence now, GST continues to have a stimulating impact on business transformation in India. As per the Deloitte’s GST@6 Survey 2023 (based on a total of 612 responses collated from six industries, including 21 per cent responses from MSMEs), 72 per cent Indian CXOs across businesses have acknowledged the positive impact of GST, up from 59 per cent in the last year.

Since the inception of GST, companies across sectors have hugely benefited with the convergence of a multi levy structure to a unified destination-based tax system, coupled with seamless flow of credit, simplified compliance, supply chain efficiencies, etc. As per the survey, 88 per cent respondents from MSMEs acknowledged that GST resulted in lowered goods and services costs.

Ninety three per cent of the respondents of the Deloitte Survey perceive the GST regime as a valuable complement to government efforts towards ‘Make in India’ initiative. In the context of ease of doing business, here are the key five areas under GST that would be critical and determine the future of GST in the coming years as revealed by the survey results:

(i) Digitisation in compliance: Automation of tax compliances by the government has been a massive win and it has worked efficiently, especially in comparison with the erstwhile regime. This has been possible because of the introduction of a ‘one-stop-shop’ portal i.e., GSTN for all compliances under GST. The first phase was focused on building the core functionalities needed by taxpayers and officers. With that in place, GSTN’s next focus was to leverage technology and data available to improve compliance, detect frauds and support policymaking. The effectiveness of e-invoicing has been low amongst MSMEs as compared to large and very large organisations and there is a need for further simplification initiatives.

(ii) Seamless flow of credit and blocked credits: Seamless flow of input tax credit is the backbone of GST. As per the survey, 77 per cent of Indian CXOs have ranked measures for unlocking working capital at second place as most needed impetus under GST law. The request from the industry is to allow utilisation of CGST credit balances across distinct persons, to allow payment of GST liability under reverse charge mechanism through credit, and to allow cash refund of year end GST credits, which should enable businesses to reduce their working capital blockage to a great extent.

(iii) Cross empowerment and division of taxpayers: After multiple deliberations over several Council meetings, the States finally reached a consensus in the 9th GST Council Meeting on the final manner of division of taxpayers between the Centre and States. As per the Deloitte survey, the respondents have cited dual investigations by multiple tax authorities as the most prominent challenge under GST, something which was ranked at the second place in the last year survey. To overcome this, the government could look at fast track GST Tribunals and an instruction could be issued to ground level officers to avoid dual investigations.

(iv) Dispute resolution: Although there has been significant progress in terms of technology and compliance, resolution of legal conflicts involving GST is still in its infancy. As per the Deloitte survey, “More than 70 per cent respondents from MSMEs category have emphasized need for resolving legal ambiguities”. Some ambiguities which have been highlighted in the Deloitte survey are taxation of supplies between related parties, ISD vs. Cross charge, and implementation of circulars at ground level.

(v) Need for an amnesty scheme: It is well acknowledged that issue based amnesty schemes have been cleared by the GST Council from time to time. In an endeavour to allow taxpayers to close procedural as well technical disputes, which mainly arose in the first 2-3 years of GST, India Inc. (98 per cent of respondents) seeks an amnesty scheme.

With reforms such as simplification of return filing procedures, technological infrastructure advancement, simplified registration procedures,GST@6 continues to spearhead key objectives of an effective, stable and transparent tax ecosystem.

The writers are with Deloitte India