India GST requires more work

Thu 22nd Mar 2018

The July 2017 new Goods and Services Tax (‘GST’) regime was an ambitious reform of a complex, and business unfriendly tax regime. But more reforms to the GST system are required if it is to realise its potential to liberalise intra-state trade in the country. Areas for focus in the next months will include:

Simplify GST rates

Reducing the use of 5 different tax rates. There is still a wide spread across the 0%, 5% 12%, 18% and 28% GST rates. This arises in confusion, wrong tax charges, manipulation of goods descriptions to gain beneficial low tax rates and likely complex tax disputes

Simplified monthly returns

The original plan for a monthly pre-return invoice reconciliation between vendors and their customers has proven too complex, and the system has effectively been suspended. The government, GST Council and Infosys, which operates the IT back-bone to the new tax are still reviewing potential simplifications

E-commerce tax

The plans to tax e-commerce transactions at source are not widely copied in the rest of the world. This could hinder development of the important sector.

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