Four years of GST in India: What businesses need to know

By Siffat Kaur, Ashwani & Associates, Chartered Accountants

According to the World Investment Report 2021, published by the United Nations Conference on Trade and Development (UNCTAD), India received USD 81 billion in foreign investment in 2021: the highest ever Foreign Direct Investment (FDI) to date. Although India has considerably improved its overall ease of doing business, moving from a ranking of 77th place in 2018 to 63rd place in 2019, the country still needs to iron out a lot of creases before international companies can become part of its growing economy.

India recently commemorated the 4th anniversary of its Goods and Service Tax (GST). This tax replaced and subsumed 11 different indirect taxes under one unified tax structure. Not only did GST help transform the country into a unified marketplace, it also changed the existing source-based tax structure into a destination-based tax structure and, most notably, helped foster better penetration of markets.

The US – India Strategic and Partnership Forum highlighted the urgent need to streamline the indirect taxation system in India. In response to constructive feedback, India spent much of the last four years bringing about changes in taxation policies, including the introduction of e-way bill generation in a bid to keep a check on tax evasion and overcome logistical challenges.

Later the country announced the eagerly awaited e-invoicing system under the GST framework. This practice will help expedite invoice authentication and facilitate invoice matching for the accurate calculation of taxes. India is also looking into the use of artificial intelligence to curb tax evasion, which includes the integration of FASTag, an electronic toll collection system operated by the National Highway Authority of India, to the supply chain mechanism.

Although it is important that shortcomings are swiftly resolved, it also needs to be understood that it takes time to reap the benefits of such a mammoth structural change. The law is still a “work-in-progress”, and the process of evolution in such a complex journey cannot be eliminated. The new India is confident that the Government will continue to take measures to deliver on its promise of a “Good & Simple Tax” in the years to come.

Siffat Kaur

GGI member firm
Ashwani & Associates, Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax
Ludhiana, India
T: +91 98554 00428
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Ashwani & Associates, Chartered Accountants is an audit, tax, and consulting firm in India with three offices. Their clients range from emerging entities to large corporations with billions of dollars as revenue. They include privately held businesses, not-for-profit organisations, and publicly traded companies. Ashwani & Associates support a local, national, and international client base.

Siffat Kaur is a B Com ACA specialising in VAT/GST consulting in cross-border business in India and abroad. She thus has experience and a vast working knowledge of all aspects of service tax, trade law, VAT, and the like. Serving clients from national and international companies and having worked in every existing kind of indirect tax branch, she offers pragmatic solutions on a cost-effective basis.

Published: Indirect Taxes Newsletter, No. 12 Autumn 2021 l Photo: IndiaPix - stock.adobe.com