Budget 2019: Modi government may further simplify and rationalize the GST tax structure in the upcoming Budget

Published: July 4, 2019 5:12:19 PM

Budget 2019-20: The Modi 2.0 government has made an objective to take the Indian economy to $5 trillion from $2.9 trillion by 2024. In the Union Budget 2019, the government will intend to further simplify the GST tax structure for achieving its objective.

Budget 2019, Union Budget 2019 India, Budget 2019 India, Budget 2019-20, Goods and Services Tax, GST, indirect tax revenue, Indian economy, small taxpayersBudget 2019 India: Here are some of the simplifications and tax reforms that are expected in GST in Budget 2019.

Union Budget 2019 India: Goods and Services Tax – the journey of this landmark tax reform – completed its two years on 30th June, 2019, just four days prior to the honourable Finance Minister’s maiden speech on Budget 2019 in the Lok Sabha.

GST, the biggest tax reform was implanted in July 2017 and since more than 1.04 crore taxpayers have registered under GST who are contributing to the growth of Indian economy. The average GST collection from the date of implementation July 2017 to June 2019 is Rs 99,886 Lakhs per month which shows the indirect tax revenue grew by 11.9 percent as compared to the pre-GST regime. GST, on the one hand, has been rewarding to the Indian economy in the form of organized tax structured with “one nation, one market and one tax” while on the other hand the traders have faced many hurdles due to the complex compliance of the GST law. In this article we discuss some of the simplifications and tax reforms that are expected in GST in Budget 2019.

Digitisation of refund process

The Government on launch of GST had assured that refund process will be totally online without any physical process. But still the process is a mixture of online forms and physical documentation and visits. Its been 2 years since GST, the taxpayers are waiting eagerly for automation of this process without any technical glitches and limitations. The government through its budget is expected to further streamline the process and make it completely digital with minimal interference of officers.

One cash ledger

At present taxpayers need to deposit separate cash for the payments of taxes, interest and penalty in the respective CGST, SGST and IGST heads. Due to this many taxpayers have faced issues of getting their money stuck in wrong ledger. This money cannot be utilized for payment. To add to the pain of the taxpayers refunds of Excess Cash Ledger are not granted easily. Instead of multiple ledgers, a single cash ledger should be introduced for ease of taxpayers. However, on 28th June, 2019 the Government has given the option to transfer the cash balance from one ledger to another. This will be a welcome relief, however we hope this budget will introduce the proposal of one cash ledger system for discharging GST dues.

Merging of tax rates

Another continuing deliberation for the government is the plan of moving towards single revenue neutral rate as against the current 6-tier tax structure. With continuous changes through recommendations of GST Council, at present more than 650 goods are charged at a rate of 12 and 18 percent which include 450+ goods are charged at 18 per cent,introducing the single 15 percent tax rate may not make a big impact on the revenue of the government. This rationalization of Tax Rates would be a welcome move from all taxpayers.

Cross utilisation of GST

In GST law the utilization of CGST & SGST credit is restricted to the State where the taxes are levied. This limits the aim of introduction of GST of One Nation, One Tax and One Market. This barrier is specially observed in supply related to immovable property like hotels, and Over-the-Counter supply of goods. It’s been 2 years and the GST law is fairly stable and now it’s time to look at the issues which crept up with the introduction of GST.

Petroleum products

On 26th June, 2019 Union Minister for Petroleum and Natural Gas in a written reply in the Rajya Sabha submitted that GST Council has to decide on levy of GST on Petroleum Products. On the policy front, the Government will like to move forward on the prolonged debate of the exclusion on natural gas and other petroleum products from GST. This will help in removing the cascading of tax and reduction in prices as the supplier has to pass the benefit of tax to the end consumers.

Ease of compliance

GST Law requires heavy compliance from businesses with monthly, quarterly and annual returns for small taxpayers too. The Council in its recent meeting have decided to introduce new returns format which includes a single page tax return for ease of compliance for small taxpayers. Further the introduction of e-tax-invoice from the GSTN portal means to ensure minimal tax evasion.

The Modi 2.0 government has made an objective to take the Indian economy to $5 trillion from $2.9 trillion by 2024. In the Union Budget 2019, the government will intend to further simplify the GST tax structure for achieving its objective. The government will take steps for the benefit of different sectors of society through reforms in the Indirect Tax Regime and overall benefit of the economy.

(By Rajat Mohan, Senior Partner, AMRG & Associates)

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