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Batting for a simplified Goods & Services Tax (GST) regime, Parliament’s Public Accounts Committee (PAC) has recommended that the Finance Ministry undertake a comprehensive review of the GST framework to identify and eliminate unnecessary procedures and requirements that complicate compliance.
This includes streamlining the return filing process by consolidating forms and reducing the frequency of filing where possible, the PAC said, in its 19th report that was presented to the Parliament on Wednesday (March 26, 2025). It also pushed for a tiered compliance approach, where smaller businesses face fewer requirements and simplified processes compared to larger entities, thereby reducing the burden on smaller taxpayers.
The Ministry has been asked to improve the user friendliness of the GST portal, and ensure that it provides clear guidance and support to taxpayers at every step in the filing process.
Criminal penalties
The Committee has called for a revamped GST 2.0 after consultation with stakeholders, including trade associations and taxpayer groups, to address their concerns and to ensure the timely collection of taxes so that the declared objective of the GST regime — a simplified and rationalised indirect tax system — is established.
The PAC has also highlighted the significant challenges faced by taxpayers, especially the punishment meted out for compliance failures, with some honest taxpayers facing criminal penalties even in cases of unintentional errors.
Regarding the registration process, the Committee argued that when the initial steps taken towards biometric-based Aadhar authentication are “riddled with so many issues, the vision of GST leading to a simplified and unified taxation system i.e. ‘One Nation One Tax’ may remain evasive”.
AI help for revenue projection
Noting that the share of indirect taxes in total revenue receipts fell from 38.76% in 2017-18 to 36.92% in 2019-2020, with fluctuations being observed in subsequent years, the PAC asked the Finance Ministry to undertake an accurate projection of the revenue to be collected with the help of data analytics and artificial intelligence tools.
The Ministry had attributed the decline to macroeconomic factors such as import volumes, global economic conditions, and changes in tax policy, including reductions in duty rates on Free Trade Agreement (FTA) imports.
Transparent refund system needed
Flagging problems in the GST return filing mechanism, the PAC has recommended that the Ministry implement a more efficient and transparent refund processing system that includes clear timelines for processing claims and regular updates to taxpayers on the status of their refunds.
“Establishing a dedicated grievance redressal mechanism for refund related issues would also be beneficial, allowing tax payers to raise concerns and receive prompt assistance,” the Committee said.
The PAC has recommended that the Ministry implement a simplified GST compliance framework especially designed for MSMEs to fast-track and automate return filing and refund processing. This should include a reduction in the frequency of return filings and allow for a more straightforward online reporting process.
For the benefit of exporters, the PAC has also called for simplification of the documentation required for exports, providing clear guidelines and checklists to help the community understand compliance requirements.
Data analytics, real-time tracking
In an era of information technology, the PAC has suggested that the Ministry use data analytics to proactively identify non-compliant taxpayers and implement stricter penalties for repeated non-compliance. It sought a case management system for the real-time tracking of pending cases, prioritisation based on tax implications, and efficient allocation of resources.
The PAC pushed for expedited implementation of a fully faceless GST collection system, by leveraging technology to facilitate all interactions between tax payers and tax authorities through digital platforms.
Noting that compensation payable to States must be provisionally calculated and released at the end of two months and then finally calculated for every financial year after being audited by the Comptroller and Auditor General, the PAC called for this procedure to be streamlined.
The Committee asked the Ministry to issue a comprehensive format for monitoring of all GST-related documents in digital form within six months of presentation of the report.
Published – March 26, 2025 09:10 pm IST
