Parliament’s Public Accounts Committee (PAC) Recommendations On GST 2.0

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March 27, 2025

Parliament’s Public Accounts Committee (PAC) Recommendations On GST 2.0

The Parliament’s Public Accounts Committee (PAC) has urged the Finance Ministry to introduce GST 2.0, a streamlined version of the current Goods & Services Tax (GST) system.

Key Recommendations Of the PAC

  • Comprehensive Review of the GST Framework: The Finance Ministry should eliminate unnecessary procedures that complicate compliance.
    • The return filing process should be streamlined by consolidating forms and reducing filing frequency.
    • A tiered compliance system should be introduced where smaller businesses face fewer requirements than larger entities.

Goods and Services Tax (GST)

  • About: The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax that has replaced multiple indirect taxes in India. 
    • It aims to unify the tax structure across the country and simplify compliance for businesses.
    • The GST Act was passed on 29th March 2017 and came into effect on 1st July 2017.
  • Structure of GST
    • Intrastate Transactions (within a state):
      • Central GST (CGST): Collected by the Central Government.
      • State GST (SGST): Collected by the respective State Government.
    • Interstate Transactions (between states):
      • Integrated GST (IGST): Collected by the Central Government and later distributed between states.
  • Input Tax Credit (ITC) Mechanism
    • Businesses can claim credit for input taxes paid at each stage of production or supply.
    • GST is applied only on value addition at each stage, ensuring no cascading effect (tax on tax).
    • The final consumer bears only the GST charged by the last seller in the supply chain.
  • GST Council: It is a constitutional body established under Article 279A of the Indian Constitution that decides major issues relating to GST in India

  • User-Friendly GST Portal:  Improve the user experience of the GST portal and ensure taxpayers receive clear guidance and support at every step.
  • Criminal Penalties for Unintentional Errors: Revamp GST laws to prevent undue criminal penalties for honest taxpayers.There is a need to ensure that penalties differentiate between intentional fraud and unintentional errors.
  • Aadhaar Authentication Challenges: The biometric-based Aadhaar authentication process needs refinement to avoid compliance hurdles.
    • Addressing these issues is crucial to achieving the “One Nation, One Tax” vision.
  • AI & Data Analytics for Revenue Projections: Use data analytics and AI for accurate tax revenue forecasting.
    • Address fluctuations in indirect tax revenue caused by macroeconomic factors, imports, and global economic conditions.
  • Transparent & Efficient Refund System
    • Implement time-bound refund processing with clear timelines.
    • Provide regular updates to taxpayers on the status of their refunds.
    • Set up a dedicated grievance redressal mechanism for refund-related issues.
  • Simplified Compliance for MSMEs & Exporters
    • Introduce a simplified GST framework for MSMEs to automate return filing and refund processing.
    • Reduce return filing frequency for small businesses.
    • Simplify export documentation and provide clear compliance guidelines.
  • Data-Driven Tax Compliance Monitoring
    • Use real-time tracking systems for pending tax cases.
    • Implement stricter penalties for repeat non-compliance identified via data analytics.
    • Introduce a fully faceless GST collection system to eliminate manual interactions between taxpayers and authorities.
  • Faster Compensation for States
    • Compensation should be provisionally released every two months.
    • The final compensation should be audited by the Comptroller and Auditor General (CAG) annually.
  • Digital Monitoring of GST Documents: The Finance Ministry should issue a comprehensive digital format for GST-related documents within six months.

Public Accounts Committee (PAC) 

  • Historical Background: It was first mentioned in the Government of India Act, 1919 (Montford Reforms).
  • About: The Public Accounts Committee (PAC) is the oldest parliamentary committee in India, established in 1921.
    • It is one of the three Financial Parliamentary Committees, along with the Estimates Committee and the Committee on Public Undertakings
    • The committee is constituted every year under Rule 308 of the Rules of Procedure and Conduct of Business in Lok Sabha.
  • Role:
    • Audits revenue and expenditure of the Government of India.
    • Ensures public funds are spent efficiently, legally, and for the intended purpose.
    • The Committee is not an executive body and can only make advisory recommendations.
  • Composition
    • Total Members: 22 (15 from Lok Sabha, 7 from Rajya Sabha).
    • Chairperson: A Lok Sabha MP, traditionally from the Opposition, appointed by the Speaker of Lok Sabha.
    • Term: One year.
    • Ministers are not allowed to be members of the PAC to maintain impartiality.
  • Significance
    • Strengthens parliamentary oversight on government finances.
    • Helps in curbing corruption and financial mismanagement.
      Enhances fiscal discipline and accountability in governance.

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Quick Revise Now !
UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध

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