As the Goods and Services Tax (GST) completes two years on July 1, it seems to be advantage the States.

On two counts, they are doing better than the Centre. First, they are getting a larger share of the overall revenue. Second, the revenue gap has come down for all, barring one State and two Union Territories.

In terms of overall revenue, the share of SGST in FY18 was ₹1.71-lakh crore out of a total mop-up of ₹7.4-lakh crore. Similarly, in FY19, SGST’s share was ₹2.78-lakh crore out of ₹1.77-lakh crore.

The States also get a share of the IGST. This April, an ad hoc settlement of ₹12,000 crore was made, which was the residual amount of un-apportioned IGST. It has been decided that from now, a 12-month cycle of ad hoc settlement will be maintained.

Closing the gap

Data for April-May of FY20 and FY19 show the gap between the projected revenue and the post settlement (including ad hoc) gross State GST revenue has come down to 20 per cent for all States, except Haryana, and the UTs of Puducherry and Delhi. The gap has been at the same level for Haryana and Puducherry but has gone up in Delhi. The gap is the lowest for Andhra Pradesh and Meghalaya, and the highest for Puducherry, at 57 per cent.

The GST, which came into effect from July 1, 2017, eliminated cascading of taxes and reduced transaction cost. During the last two years, the government has brought in various changes, both on the quantum of taxes and the inclusion and exclusion of goods and services.

Scope for improvement

While changes have been happening, tax experts see scope for some more improvements.

According to Harpreet Singh, Partner at KPMG, the industry wishlist includes clear guidelines on the anti-profiteering mechanism (such as on computing the profits, the mechanism to pass on the profits and documentation requirements), formation of a national Bench of Authority for Advance Rulings to avoid contradictory orders, clarity on the place-of-supply rules, and removal of double taxation on ocean freight.

Tax experts feel that the Centre and States, along with two Union Territories, should work to rationalise rates, simplify or even abolish the e-Way bill, bring clarity on supply rules, clearly define profiteering, overhaul the advance ruling mechanism, and further simplify GST returns.

It is also expected that GST 3.0 will be more technology driven than the earlier avatars.

Archit Gupta, founder and CEO of ClearTax, said the reconciliation of data before the filing of annual returns continues to be a challenge.

And, there are grave implications of not reporting an amount or incorrect reporting, which makes reconciliation a complex activity.

PTI reports: In a release on Sunday, the Finance Ministry said it will come up with more GST reforms by introducing a new returns system, rationalising the cash ledger system and a single refund-disbursing mechanism.

The ministry said it will introduce the new returns system on a trial basis from July 1 and make it mandatory from October 1. “Sahaj and Sugam returns for small taxpayers are proposed,” it added.