How the Latest GST Council Meeting Could Reshape India’s Tax Landscape

Financial ExpressSeptember 4, 2024

With the introduction of Goods and Services Tax, the GST Council takes a fundamental place in the entire framework. The GST Council is chaired by the Union Finance Minister and comprises state finance ministers.

The GST council spearheads the major decisions on critical matters, from tax rates, exemptions, thresholds, clarifications on interpretational issues, all while accommodating the complexities of the stakes of various states. Fundamentally GST Council’s objective is to establish a uniform tax structure for goods and services across India which certainly has a pivotal role in shaping India’s tax landscape.

The industry often needs to tweak their business strategies based on the decisions made in GST Council meetings. For instance, the introduction of e-invoicing and e-way bills mandated businesses to invest in new technologies and streamline their supply chain processes. This has undoubtedly enhanced operational proficiencies and reduced administrative burden and compliance cost for taxpayers, enabling them to focus more on their core business activities.

Further the key decisions and clarifications provided by the GST Council help businesses in effective tax planning. The reduction in the threshold for reporting B2C supplies and the availability of option to amend GSTR-1 within the same taxperiod has permitted accurate tax reporting and planning which also facilitates better supervision of cash flows and avoidance of risk of penalties.

The clarifications from the GST Council on key issues also helps taxpayers in understanding the implications of new rules and adjusting their financial planning and strategies accordingly. For instance, the 53rd GST Council proposed several amendments, including clarifications on corporate guarantees, and rate changes for various goods and services. These provide clarity to the taxpayers regarding the stand of the government and also many a times lowers the probability of disputes.

The progressive stance of the GST Council in focusing on simplifying the compliance system has had a positive impact on confidence of companies investing in India. Thus, a stable and predictable tax environment reduces the risk for investors. Also, regular updates and clarifications provide an apparent and predictable tax ecosystem, which is critical for boosting confidence of investors.

During the last 7 years we have witnessed that introduction of a robust tax technology has improved compliance, however there are challenges with respect to audit, assessment and taxability of some transactions such as corporate guarantee, secondment of foreign employees, etc. This implies that while progress has been made, there is still room for improvement in the GST framework.

GST has both positive as well as negative impacts on the economy and the GST council has certainly facilitated the proactive planning that is adopted by businesses owing to various decisions taken by the council. This not only facilitates economic growth by being transparent, but also has a major role in the enhancement of ease of doing business and creating a unified taxation system in the country.