Context : The PAC has urged the Finance Ministry to simplify the GST regime by eliminating unnecessary compliance burdens, improving the refund mechanism, and leveraging AI for better revenue forecasting. Key recommendations focus on easing MSME compliance, ensuring fair penalties, and streamlining the GST portal for user-friendliness.
Relevance : GS 2 (Governance & Transparency) ,GS 3 (Indian Economy & Taxation)
Need for Comprehensive GST Reform
- Simplification of Compliance Procedures
- PAC recommends eliminating unnecessary procedures and requirements.
- Calls for streamlining the GST return filing process by consolidating forms.
- Advocates for reducing the frequency of filing returns where feasible.
- Proposes a tiered compliance approach to ease the burden on MSMEs.
- Enhancing GST Portal User-Friendliness
- PAC stresses the need for an intuitive digital interface for taxpayers.
- Ensuring real-time guidance and support at every step.
Addressing Compliance Challenges
- Unfair Penalty Structure
- Highlights disproportionate penalties for compliance failures.
- Recommends a fairer penalty system to differentiate between intentional fraud and unintentional errors.
- Calls for decriminalization of minor procedural errors in tax filing.
- Aadhaar-Based Registration Issues
- Identifies inefficiencies in biometric-based Aadhaar authentication.
- Warns that current implementation flaws could hinder the “One Nation, One Tax” vision.
- Calls for a more efficient and foolproof registration mechanism.
Revenue Projections & AI Integration
- Declining Share of Indirect Taxes
- Share of indirect taxes in total revenue fell from 38.76% (2017-18) to 36.92% (2019-20).
- Calls for improving revenue forecasting to ensure tax stability.
- Use of AI and Data Analytics
- Recommends leveraging AI and big data for accurate revenue projections.
- Ensuring efficient tracking of tax collection trends and addressing revenue leakages.
Transparent and Efficient Refund Mechanism
- Issues with GST Refunds
- Recommends clear timelines for refund processing to avoid delays.
- Calls for a dedicated grievance redressal mechanism for refund-related disputes.
- Suggests an automated tracking system to keep taxpayers informed about refund status.
Special Focus on MSMEs
- Simplified Compliance for Small Businesses
- Recommends a special compliance framework for MSMEs.
- Automated return filing and refund processing for ease of business.
- Reducing filing frequency and enabling a more streamlined online reporting system.
Potential Impacts
- Economic Growth & Ease of Doing Business
- Simplification of GST compliance will reduce business costs.
- MSMEs will benefit from lower compliance burdens, improving their competitiveness.
- Efficient refund mechanisms will ensure better liquidity for businesses.
- Increased Taxpayer Trust & Compliance
- A fairer penalty structure will encourage voluntary compliance.
- Better user experience on GST portal will reduce procedural hurdles.
- AI-driven revenue forecasting will enhance government’s fiscal planning.
Root Causes & Past Issues
- Initial GST Implementation Challenges
- Frequent changes in GST rates created uncertainty for businesses.
- Complex return filing system made compliance difficult, especially for MSMEs.
- Refund delays led to working capital issues for exporters.
- Previous Reforms & Their Limitations
- E-invoicing and QRMP (Quarterly Return Monthly Payment) attempted to simplify compliance but still required further ease of access.
- Introduction of faceless assessment aimed at reducing human intervention but needed better execution.
Conclusion
The PAC’s recommendations aim to transform GST into a truly business-friendly and efficient tax regime. Implementing simplified compliance, AI-driven revenue estimation, and a transparent refund system will strengthen India’s indirect tax structure while fostering economic growth and ease of doing business.
