TaxTMI 
TaxTMI 
TaxTMI 
When the clock struck midnight on July 1, 2017, India turned a new fiscal page—ushering in the Goods and Services Tax, often heralded as the country’s most ambitious indirect tax reform since Independence. A 'One Nation, One Tax' dream, anchored in constitutional amendments and federal consensus, promised simplicity, transparency, and a unified market.
Eight years hence, GST stands as a transformative yet imperfect journey. Much like the nation it serves, GST is a blend of contradictions: revolutionary in spirit but challenging in execution.
Let us take stock—not merely through statistics, but through the lens of businesses, sectors, and society. In this first part, we examine three hypothetical yet realistic situations where GST has empowered, and three where it has adversely impacted.
I. The Empowered – How GST Became a Game-Changer
1. The Aspiring D2C Exporter – Gujarat
Kavita, a young textile entrepreneur from Surat, used to sell locally to wholesalers, tangled in the web of multiple VAT registrations. GST gave her an IGST route for exports with input credit continuity. Seamless refund mechanism under Rule 96 enabled her to price competitively for international buyers. Her company now exports to five countries.
The Takeaway: GST’s zero-rated export structure, harmonized HSN classification, and availability of input credit across states transformed her into a global player.
2. The Construction Tech Firm – Karnataka
Before GST, service tax, VAT, and excise duties complicated project costing. Post-GST, a unified 18% rate on works contracts, input credit across procurement and subcontracting, and e-invoicing created pricing predictability and improved compliance. The firm successfully closed long-pending audits.
The Takeaway: Clarity in tax rates and legal status of works contracts under GST removed decade-old disputes.
3. The Digital Course Platform – Noida
An ed-tech startup was uncertain whether to register in all states under VAT/service tax. GST’s centralized registration under Section 22, clarity under Schedule II for online services, and automated compliance tools enabled smooth national outreach. Even overseas subscriptions became export of services under Section 2(6), attracting no tax but enabling input credit.
The Takeaway: Digital entrepreneurs could scale pan-India without the burden of physical nexus-based registrations.
II. The Adversely Impacted – Pain Points in GST
1. The Handicrafts Artisan Collective – Rajasthan
A tribal artisan group engaged in traditional goods had earlier benefited from VAT exemptions. With GST's insistence on formal ITC chains, their margins were squeezed. Non-availability of digital access, poor awareness, and input taxation on supplies like packing and display materials made survival difficult.
The Issue: GST’s formalism inadvertently penalized the informal sector and cultural artisanship.
2. The Job Worker in Auto Ancillaries – Tamil Nadu
Under earlier laws, job work attracted nominal central excise. Post-GST, job work became taxable under Section 143 if not returned within 1 year. A delay in subcontractor returns due to floods triggered demand and penalty. Even though there was no evasion, the officer-imposed liability under read with Section 73.
The Issue: Compliance rigidity and strict timelines in procedural rules often hurt MSMEs due to force majeure conditions.
3. The Restaurant Chain – Maharashtra
A thriving QSR chain invested heavily in outlet refurbishment, kitchen infrastructure, and software licenses. However, due to the GST rate of 5% without ITC under Notification No. 46/2017-CTR, they couldn't claim credits. The cascading tax effect inflated their effective cost by 8–10%.
The Issue: Denial of ITC in specific sectors distorts neutrality, violating the foundational GST principle of input credit continuity.
III. GST: Neither Utopia nor Catastrophe
India’s GST story is neither a triumphalist chant nor a failure narrative. It is a living, evolving mechanism—adaptive yet imperfect. The GST Council has, over these eight years, steered critical corrections: inverted duty reliefs, rate rationalization, e-way bill introduction, and now, e-invoicing integration.
However, challenges remain:
- Procedural rigidity that overlooks practical business realities
- Proliferation of advance rulings with contradictory conclusions
- Compliance burdens on micro and small entities
- Misuse of anti-profiteering, and delays in refunds or mismatches
IV. Sectoral Realities – Not All Reform is Uniform
GST promised uniformity, but implementation across sectors shows a patchwork of experiences:
1. Real Estate: Ambiguity in Tax Chains
While GST attempted to unify taxation on under-construction properties (via Notification No. 3/2019), confusion persists over ITC denial and valuation benchmarks under Rule 31. The denial of ITC despite input-heavy nature of construction contradicts the principle of tax neutrality.
2. E-commerce: Tech vs. Tax
Section 52 introduced TCS for e-commerce operators. While it strengthened traceability, it also led to reconciliation nightmares, delayed refunds, and skewed working capital cycles, especially for smaller sellers using platforms like Amazon or Flipkart.
3. Healthcare: Taxing the Grey Zones
Though healthcare is largely exempt, diagnostic labs and wellness services face interpretational issues. Classification of bundled services—whether as healthcare or cosmetic—has triggered conflicting AAR rulings, leading to tax disputes.
V. Legal Landscape – The Judiciary’s Role in Shaping GST
In these eight years, Indian courts have played a crucial balancing act in GST jurisprudence.
Takeaway: The courts have been instrumental in curbing administrative excesses, though contradictory rulings continue to create uncertainty.
VI. Trust vs Terror – The Compliance Paradox
GST promised automation and trust-based self-assessment. Yet, the system has grown increasingly enforcement-heavy:
- Frequent blocking of credits under Rule 86A without speaking orders
- Use of DRC-01A as a pressure mechanism rather than a pre-adjudication facilitation
- Mismatch notices under Rule 88D leading to credit reversals based on GSTR-2B errors, even in genuine supplier cases
While audit, scrutiny, and enforcement are necessary, their misuse has eroded confidence among taxpayers who are otherwise compliant.
VII. A Brief Look at What Worked Well
- E-way Bills: Despite initial resistance, e-way bills have become effective tools in logistics visibility and compliance enforcement.
- E-invoicing: For B2B reporting, the introduction of Invoice Reference Numbers (IRNs) has ensured accuracy and reduced fake invoicing to a large extent.
- GSTN as an Infrastructure: Despite flaws, it is a significant leap in digitizing India’s tax system.
VIII. Conclusion: A Reform in Transition, Not Completion
GST is neither broken nor fully functional. It stands at a midpoint—reflective of India’s complex federal, technological, and political realities. Its next leap must go beyond rate changes and venture into:
- Simplified compliance norms for small traders
- Jurisdictional clarity for departmental officers
- AI-powered grievance redressal with statutory timelines
- Dispute resolution free from conflicting AAR regimes
The true test of GST will lie not in compliance scores but in the ease, efficiency, and equity it delivers.
If this resonates with you, I’d welcome your reflections—whether you’re a CFO, a small trader, a consultant, or just someone trying to file GSTR-1 before due date.
Let’s continue to engage with GST—not just as taxpayers, but as stakeholders in a maturing fiscal democracy.
CA Navjot Singh
+91 9953357999