PwC India has called for simplification of India's goods and services tax regime, in a report to mark 200 days since the regime entered into force.
The report points out that the GST law prescribes filing of at least three returns every month, as well as an annual return. Apart from this, it says, there are other returns such as input credit distributor's return. Calling for simplification, the report says that the tax administrative burden for firms has been higher than expected, especially for the services industry, which had generally been subject to a biannual filing obligation.
On rates, PwC India noted that contrary to many territories' relatively simple one-rate tax structure, India levies four rates of value-added tax, plus the zero rate, with one rate as high as 28 percent and sometimes two different rates applying to the same service –†for instance, hotel accommodation –†depending on the value of such.
The report says: "Additionally, in many cases, the Government has chosen to levy the tax on the basis of the status of the buyer, instead of the product itself, and this has resulted in a great deal of complexity. Additionally, in certain cases, a distinction has been made on the basis of the mode of the supply of products, which is unheard of around the world. For instance, in the case of goods procured through e-commerce, additional compliance requirements have been proposed."
The report notes measures that have been taken so far to amend the regime to make it more simple, including proposals currently under consideration to eradicate some filing requirements.
It recommended that this year the Government should look to prune its value-added tax rates and at least narrow the base of the 28 percent rate. It said that this 28 percent rate should be lowered from 28 percent to around 20 percent to 22 percent. It also proposed consolidating the 12 and 18 percent rates into a single rate somewhere in the range of 14 to 16 percent.
On the administrative burden, PwC India welcomed plans to overhaul filing obligations but recommended also the removal of onerous documentation procedures such as the letter of undertaking required in the case of GST-free exports. It also recommended that India should consider merging the direct and indirect tax boards.
Other recommendations include that the Government should consider reforms to alleviate pressure on firms' cash flow and constitute a public GST forum, to enable taxpayers to be more involved in the GST reform process going forward.
Among other things, the report also calls for measures to ensure that tax-related disputes are minimized, including by strengthening the advance ruling process.
PwC India concluded: "Implementation of the GST is truly a remarkable achievement for India and all the stakeholders, and the Government, industry, and consumers deserve to be applauded for this. It's now time to consolidate and let the regime stabilize, while continuing to explore structural changes to bring it closer to what we had all visualized. We hope the wealth of experienced garnered by the Government and industry over more than 200 days will make GST 2.0 a much improved version of GST 1.0."