The decisions taken by the Goods and Services Tax (GST) Council in its 57th meeting on Thursday reveal two distinct changes in the attitude of the tax administration: increased trust in the taxpayer, and reduced anxiety over tax revenues. This is a big change from the system in place so far, where taxpayers have been bogged down by compliance requirements, and the tax enforcement has used this complexity to try to extract every rupee it can. The data show gross collections have not often deviated significantly from the mean over the last two years. After nine years, taxpayers have also become familiar, if not comfortable, with the tax filing system. The previous meeting also rectified most rate-related issues in GST and even reduced the number of slabs, a major driver of the complexity of the tax system. The time was ripe for a significant overhaul of the processes and administration of GST, and the Council has delivered. Thursday’s reforms address complications in the entire chain of GST paperwork, from registration and return filing, to refunds and litigation. The thrust is to reduce human discretion in these processes by automating registrations, reducing the number of times small businesses have to file returns, handling refunds through computer-based verification, and significantly reducing the powers of GST officers. In essence, trust the taxpayer to comply, and crack down only when non-compliance is demonstrable. That is the way it should be, instead of a ‘guilty until proven innocent’ approach.

While all the simplification measures are welcome, some specific ones deserve special mention as they will substantially ease areas of major discontent. So far, taxpayers were denied input tax credits (ITC) until their suppliers had filed their returns. This meant that thousands of genuine businesses that had received supplies and paid taxes on them were denied ITC, leading to a drying up of crucial working capital. The GST Council has tasked a committee to find a solution that can be implemented by April 1. Removing the arrest powers of GST officers is another step that will significantly reduce harassment, as will tightening the rules around inspection, searches, and seizures of consignments. The Centre has also used this opportunity to introduce a faceless assessment system for Central GST registered companies, along the lines of the popular faceless system in income tax. The decision to review rates only once a year, and implement rate changes only at the start of financial years, removes significant uncertainty that usually arises each time the Council meets. In its 10th year, GST is finally starting to look like what it should have at the time of rollout.