“Even though in 1947 we became a political entity, India remained many economic entities. This Bill once it becomes an Act will have a significant impact on the taxation system in India. There is no free-flow of goods and services in the country. Object of GST is can we have one tax, every assessee has one interface with one assessing officer.”
– Arun Jaitley, Union Finance Minister while replying on
GST debate in the Parliament on March 29, 2017
On the one hand when the Government is scrapping set of archaic laws, a new tax regime is set to unfold on July 1. For the same, the Special Session of the Parliament is to be convened on the midnight of June 30. There are many concerns and confusions about the system and its implementation and like any major changes it is going to be desruptive in many ways.
Bharat is not the first country to adopt this system. Starting with France in 1954, more than 160 countries have adopted the system of unified taxes. Not surprisingly, within few days of the Parliament clearing the Bill, most of the States also followed the suit. Through this Constitutional Amendment we will be replacing as many as 13 indirect taxes with one simple tax, creating a boundaryless and a unified national market that is expected to increase the country’s Gross Domestic Product (GDP). To realise the objectives, not only the Government agencies but our traditional business houses will have to adapt to the new regime.
What we have adopted is the dual-Goods and Services Tax (GST) model on the pattern of Canada, under which Central GST and Inter-State GST (IGST) will be collected by the Union Government while respective States will collect the taxes on sales of goods and services in their States. The collected IGST revenue will be distributed between the States as per the view of the proposed GST Council. The Council has categorised as many as 1,211 items under various slabs starting from 5 per cent to 28 per cent. All this looks fine and simple, still there are apprehensions among people, especially the business community and there are reasons for it.
Implementing such overhaul exercise in a massive country like Bharat is not an easy task. Whole machinery will have to gear up for this transition in a quick manner. Lack of clarity on this part is not percolated down is the key issue.
Becoming GST compliant is a gigantic task which each business house has to undertake. The account books will have to be revamped with the online processes of taxation. The traditional family businesses that are used to manual accounting will naturally face difficulties. The increasing dependence on professionals like Company Secretaries and Chartered Accountants is another concern.
The States also had their concerns which the Union Government has tried to address by working out a compensation formula if manufacturing States face any losses over the consuming States.
The real concerns are for small and medium businesses who always find credit crunch. They will find this system cumbersome, so we will have to devise mechanism to address their issues. There are doubts raised by experts over whether GST can be less inflationary. The issue of equity in single tax regime is also important.
So there are valid apprehensions and they are bound to be there, the same we had seen when the Value Added Tax was introduced. The path of this simplification process is certainly complex. The real question is whether we really want to go ahead with transparent and unified tax regime. Despite all anxieties about the new rates, the institution called GST Council and the execution of the whole system; whether we want to be tax compliant society or not is the real question. Otherwise, the issues of high tax evasion and taxes over taxes will keep haunting our economy.
@PrafullaKetkar
