The Evolution of GST


Comparing Old and New Policies

Introduction

Goods and Services Tax (GST) has been a significant reform in India’s tax system, aiming to unify and simplify indirect taxation. Since its introduction, the GST framework has undergone several updates to improve its effectiveness and address emerging challenges. In this blog post, we’ll explore the key differences between the old and new GST policies and discuss why the new GST policy is considered superior.

Comparing Old and New GST Policies

1. Overview of GST

Old GST Policy:

  • Implementation: Introduced on July 1, 2017, merging various taxes into a single system with CGST, SGST, and IGST.
  • Rate Structure: Multiple GST slabs (5%, 12%, 18%, 28%) were applied to different goods and services.
  • Compliance Burden: Businesses had to file multiple returns and maintain detailed documentation.

New GST Policy:

  • Ongoing Updates: The framework has evolved with amendments to improve efficiency and address industry needs.
  • Revised Rates: GST rates have been adjusted, with some goods moved to lower slabs and certain exemptions introduced.
  • Simplified Compliance: Enhanced systems for filing and documentation have been implemented.

2. Changes in GST Rates

Old GST Policy:

  • Multiple Rate Slabs: Goods and services were taxed under several rate slabs, causing complexity.
  • Exemptions: Essential services and items were exempt from GST.

New GST Policy:

  • Revised Rate Structure: The government has streamlined the rate structure, reducing confusion and simplifying tax rates.
  • Zero-Rated Exports: Export of goods and services remains zero-rated, allowing for refunds on input tax credits.

3. Compliance and Filing Procedures

Old GST Policy:

  • Frequent Filings: Multiple returns (GSTR-1, GSTR-2, GSTR-3B) had to be filed monthly.
  • Manual Reconciliation: ITC claims required detailed manual reconciliation.

New GST Policy:

  • Streamlined Returns: New systems like GSTR-1 and GSTR-3B, along with the QRMP scheme, have simplified the filing process.
  • Quarterly Returns: Small taxpayers can now file returns quarterly, easing their compliance burden.

4. E-Way Bill and Invoicing

Old GST Policy:

  • Mandatory E-Way Bills: Required for interstate movement of goods exceeding a certain value.
  • Basic Invoicing: Businesses had to generate GST-compliant invoices manually.

New GST Policy:

  • Enhanced E-Way Bill System: Improved tracking and automation have made the e-way bill system more efficient.
  • Digital Invoicing: E-invoicing has been introduced, requiring standardized formats and real-time validation.

5. Input Tax Credit (ITC)

Old GST Policy:

  • Manual ITC Claims: Claims needed manual reconciliation and verification.
  • Restrictions: ITC claims had limitations for certain goods and services.

New GST Policy:

  • Automated ITC: Enhanced ITC mechanisms with auto-population in returns reduce errors and disputes.
  • Improved Transparency: Better tracking and verification reduce fraudulent claims and ensure accuracy.

6. Penalties and Enforcement

Old GST Policy:

  • Penalties: Penalties for non-compliance included late fees, fines, and interest.
  • Enforcement Challenges: Enforcement mechanisms faced difficulties in detecting fraud and ensuring compliance.

New GST Policy:

  • Updated Penalties: Stricter penalties and enforcement measures have been introduced.
  • Enhanced Enforcement: Technology and data analytics have improved enforcement and fraud detection.

The Evolution of GST