GST rejig: Credit relief, export push and simpler rules make Diwali come early for industry, says EY’s Bipin Sapra

As the festive season draws near, the industry has much to cheer about and celebrate. The 57th GST council has unleashed a set of bold reforms. Rate rationalisation was the first set of major reforms undertaken last year.

The council’s latest decisions can broadly be grouped into four key reform areas:

Rationalisation of input tax credits and expansion of refunds of accumulated credits, including credits relating to input services and capital goods;

Measures to support exporters of goods and services;

Streamlining GST administration and processes, particularly refunds, returns, e-way bills and adjudication; and

Decriminalisation of GST law, including removal of draconian powers of arrest.

In addition, the council has sought to address sector-specific anomalies in GST rates and the law. The breadth of these reforms is significant and represents a comprehensive attempt to iron out structural and procedural inefficiencies. Collectively, these measures should make GST simpler, more business-friendly and better aligned with its original objective of a seamless value-added tax.

The impact of these reforms on the industry will be multifold. The release of credit blockages on account of rationalisation of Section 17(5) will reduce the cascading effect of taxes across sectors, reducing the cost of goods and servicesproduced and sold in India. The message is clear: efficiency is paramount and the government is out to remove the cost inefficiencies for goods and services to make them more competitive globally while also creating a conducive business environment. Diwali has come early for most industries!