Recently implemented Goods and Services Tax, popularly called the GST, was introduced with a much extravaganza at the Central Hall of the Parliament on 31st May. As we all know, the new taxation regime aims to subsume all additional, indirect taxes currently levied on the
interstate movement of goods and services rendered. This single tax scheme was originally meant to subsume a large number of multiple taxes, which have been creating confusion & chaos and replace them with one uniform tax in the country. The ultimate objective of the GST was to facilitate greater efficiency in tax collection. Alas! What we have got is far worse than the tax regime which existed.
If we look at the background, the GST was first implemented by France in the year 1954 with its main motive to curtail tax evasion. It is a well known fact that more than 160 nations have implemented GST and more than 40 models of GST regimes which are currently running through the system of various economies in the world, all of include a diverse set of rules and regulations. While the Central Government aims to move towards the same ideology, it overlooks the fact that India is a developing and not a developed nation. Hence, with the implementation of GST it will be difficult to maintain the stability of India’s growing economy in light of the Nation’s diverse State and Polity structure. As per the Constitution, India is a Quasi-Federal State. Hence, the taxation regime implemented in its present form with a centralized authority being in place will harm the Quasi-Federal structure of the country.
Coming to the rates at which GST is levied in India and across the globe. Here, one of the biggest problems I have with the GST is that there are multiple rates which vary across 5%, 12%, 18% and 28% in addition to the cess for luxury items. Multiplicity of rates goes against the very spirit and object behind GST which as largely publicized is One Nation, One Market, One Tax. If one draws an analysis of the taxation structure between GST in India and in other countries we find that, in countries like New Zealand and Singapore taxes are applied at a single and consistent rate, unlike the present GST regime in India. The application of the GST tax in Malaysia brought with it abolition of the Sales Tax and the Service Tax, in place of which singular GST began to be levied at 6%. In China too, the standard rate of tax has been fixed at 17%. Moreover, in Australia, the GST is a federal tax which is collected by the supreme tax authority in the country. It is divided further, among the states without a very great degree of conflict arising through the process.
The argument that One Nation, One Market, One Tax essentially means one rate of tax on a particular “category” of goods and services across the markets, is unpalatable simply for the reason, that if we continue to have multiple tax rates though uniform, among states, inter-se, then what we achieve through this mega roller coaster ride in tax policy is no uniformity of tax rates amongst various states. This unfortunately, frustrates the very idea behind GST, being to remove confusion of multiple taxes thereby smoothening the tax collection process. Not only there is not a single uniform rate, but the taxing process has also been made more complex and cumbersome especially for the small and medium scale traders. It’s distressful
that they will now have to furnish there returns on a monthly basis and one annually which adds up to 37 returns annually. Albert Einstein, on tax filing, once said that ‘This (tax filing) is too difficult for a mathematician. It takes a philosopher.’
Exemptions from the GST has its own positives and negatives but I want to emphasize this GST, as being implemented in the present form, is not a single national tax but a set of 38 taxes, i.e., a GST for each of the 29 States and seven federally administered Union territories, a federal GST and an integrated GST on Inter-State supplies. Confucius once said, “life is really simple, but we insist on complicating it.” The problem is that it takes a genius to make something simple. I am surprised that there are one too many geniuses in the Modi Government; and perhaps that is their problem.
As I have mentioned above, the premise behind Goods and Service Tax was to curb the problem of tax evasion. GST could have been a success story in our country. However, shoddy and mismanaged implementation of GST, in this fray economy, makes the future bleak and far from a Good and Simple Tax. The Government is trying to aimlessly throw all its darts at once, desperately hoping to hit the bulls eye. The citizens functions as chickens, still trying to collect their eggs until the butcher arrives to slaughter them. Even the cook doesn’t know the outcome of his meal until its finally prepared. But once the deed is complete either for good or bad, nothing can be done to redo it. The Government must realize that adding more spices will only ruin it. One of the most disturbing pieces of news is the widespread protests by traders in Surat, the economic capital of Gurjat and in many other States. It is witnessing an unprecedented protest against the new tax regime, the question is why have thousands of traders deserted their shops and hit the streets, in protests. The reason is that the textile industry, which is still in the process of recovering from demonetization over, has been imposed with a tax on Khadi cloth, which since Independence was a tax free commodity as it is an essential commodity.
Moreover, small-time traders are majorly either illiterate or computer illiterate, hence, making it even tougher for them to adapt to these changes. Hiring a chartered accountant will only increase the cost of running the business by lakhs. These form the crux of reasons as to why lakhs of traders associated with the textile industry are on the streets. As of July 17th, 2017, the textile industry in Gujarat itself has suffered an estimated loss of roughly Rs. 10,000 crores and 40,000 crores across the country. While the jury is still out on, where GST will the take the nation’s taxation policy, one thing is clear that the concerns of the traders are genuine and need to be addressed by the Government at the earliest.