How would you evaluate the success of the goods and services tax (GST) since its implementation five years ago?
I believe that the GST has been a success. The recent budget has reported a significant increase in the number of taxpayers registering for GST. Before the GST, there were various sales taxes and other taxes, which were economically inefficient. Therefore, in terms of efficient taxes, the GST is incredibly efficient. Looking ahead, the government is focused on data matching and e-invoicing to ensure compliance. India is leading the world in this regard, and this e-invoicing approach is innovative. However, the complexity of different rates needs to be addressed. While I don’t fully understand the collective federalism approach, I believe that more consistent rates applied across a broad base from a tax policy perspective will drive greater efficiency and reduce compliance costs.
To what extent do you think the Indian tax authorities have undergone reforms, given their past accusations of tax terrorism?
Historically, there were lots of retrospective changes in the law that unsettled foreign investments. However, in the last five or six years, there haven’t been any real retrospective changes, and this is reflected in this year’s budget, which shows consistency in tax policy with not a great deal of change. Therefore, my sense is that consistency is now a focus, especially when it comes to foreign investment by the government. One thing I hear from global clients, which I think has improved immensely, is the dispute mechanisms in the country and how to expedite the resolution of cases.
In your view, what would be the impact of Pillar Two solutions of the BEPS (base erosion and profit shifting) project on India? There weren’t any BEPS-related announcements in the recent budget.
I was expecting some announcements on Pillar Two of the budget, but it seems there weren’t any. The government will likely be considering this over the next few months. From a global perspective, European governments are working towards implementing it by 2024, and there’s ongoing work by domestic governments and the OECD to ensure consistent implementation. As for India, I don’t expect a significant impact since minimum tax is already at 15%, and many exemptions and concessions have been phased out over time, which would otherwise be affected by Pillar Two. I don’t anticipate significant impact on Indian economy or coffers.