The implementation of the Goods and Services Tax (GST) in India was a historic moment for the country, and a major step towards simplifying and unifying the tax structure of the nation. However, like any major reform, the GST system has faced its fair share of challenges and criticisms. In order to address these issues and further strengthen the system, the Government of India constituted a Group of Ministers (GoM) on GST System Reforms.
The GoM, consisting of various state finance ministers and headed by the Union Finance Minister, was formed in September 2019 to review the GST system and suggest improvements. In this article, we will take a closer look at the formation of this GoM, its objectives, and the recommendations made by the group.
The Constitution of India provides for the formation of GoMs, which are temporary groups consisting of ministers from different departments or states. These groups are formed to deliberate on specific issues and make recommendations to the government. In the case of the GoM on GST System Reforms, the group was formed to address the challenges faced by the GST system and suggest reforms.
The GoM was constituted by the GST Council, which is the apex body responsible for overseeing the implementation of the GST system in India. The council comprises of the Union Finance Minister and the finance ministers of all the states and union territories with legislatures. The council is chaired by the Union Finance Minister and meets periodically to review the GST system and make recommendations.
The GoM on GST System Reforms was formed with the objective of reviewing the GST system and suggesting reforms to address the challenges faced by the system. The group consisted of the finance ministers of six states, namely Bihar, Gujarat, Kerala, Punjab, Tamil Nadu, and West Bengal.
The GoM on GST System Reforms had the following objectives:
The GoM on GST System Reforms made several recommendations to address the challenges faced by the GST system. Some of the key recommendations of the group are discussed below:
The GoM recommended that the GST return filing process be simplified and made more user-friendly. The group suggested that the current system of filing three returns per month be replaced with a single monthly return, which would be easier to file and less time-consuming for taxpayers.
The GoM recommended that the issue of inverted duty structure be addressed by reducing the tax rate on inputs or increasing the tax rate on outputs. This would help to reduce the cost of production and make Indian goods more competitive in the international market.
The GoM recommended that e-invoicing be made mandatory for businesses with a turnover of Rs 50 crore or more. This would help to reduce the incidence of fake invoices and tax evasion, and improve compliance with the GST system.
The GoM recommended that the ITC rules be simplified and made more transparent. The group suggested that the current system of provisional credit be replaced with a system of final credit, which would reduce the compliance burden on taxpayers.
The GoM recommended that the GST rates be reviewed periodically and reduced wherever possible. The group suggested that the current system of multiple rates be replaced with a two-rate structure, with a lower rate for essential goods and services and a higher rate for luxury items.
The GoM recommended that measures be taken to increase GST revenue. The group suggested that tax evasion be curbed through measures such as e-invoicing and an information-sharing mechanism between the GST and income tax departments. The group also recommended that the GST base be widened by bringing more products and services under the ambit of the tax.
The GoM on GST System Reforms was constituted with the objective of reviewing the GST system and suggesting reforms to address the challenges faced by the system. The group made several recommendations, including the simplification of GST returns, addressing the issue of inverted duty structure, mandatory e-invoicing, simplification of the ITC rules, periodic review of GST rates, and measures to increase GST revenue. These recommendations, if implemented, could go a long way in strengthening the GST system and making it more user-friendly and efficient.
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