One year of GST: Tech failure posed challenge, says finance secretary

Small businesses around the country found it hard to adjust to the new IT system, and the GST network failed to cope with last-minute spikes in filing of returns, forcing the GST Council to defer several deadlines.

Glitches in the technology backbone of the Goods and Services Tax (GST) have posed the biggest challenge in implementation of the landmark reform, finance secretary Hasmukh Adhia said in an interview ahead of the first anniversary of the indirect tax regime that had been billed as a potential game changer.

The other challenge in the first year of GST implementation was in plugging an “information gap”, says finance secretary Hasmukh Adhia.(PTI/File Photo)

Small businesses around the country found it hard to adjust to the new information technology (IT) system, and the GST network failed to cope with last-minute spikes in filing of returns, forcing the GST Council, which is overseeing the regime, to defer several deadlines. The GST return filing procedure was also relaxed several times to make compliance with the new regime easier.

“Technological failure has been the biggest crisis — the inability of the IT system to cope with the new regime. There were certain technological glitches, so we had to shift some of our deadlines,” Adhia said.

Following the glitches in the GST network, the IT backbone of the new indirect tax regime, the GST Council in April formed an IT Grievance Redressal Committee.

As the indirect tax regime enters its second year, Adhia said the focus will be on further simplifying the process of return filing. The GST Council, in its last meeting on May 4, approved the design of new return forms. It was decided that the current system of filing summary returns (GSTR-3B) and final sales returns (GSTR-1) would continue for six months by when the new return filing system will be ready.

The other challenge in the first year of GST implementation was in plugging an “information gap,” said Adhia, who also is revenue secretary.

“Information gap is expected when a new system is introduced, but our department has undertaken a massive push to disseminate information. And it is because of this that the (GST Network) system has stabilised. The issue with refunds cropped up only because of lack of understanding. Now the information gap has been bridged and 90-95% of the refunds have gone,” Adhia said.

Many exporters had complained of delays in settling of refund claims that, they said, had made them less competitive than rivals from other countries. GST had been in the making for nearly two decades and eventually, it was “political will” that made it a reality in 2017, the finance secretary said.

“There was no panic but there was an urgency among both the state and central governments. The agility with which the GST Council took decisions is amazing, we never lost time in taking decisions,” Adhia said.

Adhia said the biggest success of GST has been “formalisation of the economy” through one tax that had subsumed a plethora of local levies, breaking down inter-state barriers to trade in goods and services.Tax compliance is increasing, he said.

“Now, with GST, the big difference will be that it is driven by IT, so it will be increasingly difficult for people to defraud the system. In fact, there will be no need for physical inspections, the information capturing is automatic,” he said.