Amidst rising criticism on the multi-slab tax levied under GST, Prime Minister Narendra Modi in a recent interview to ‘Swarajya’ magazine put forth his Government’s logic on the same. Stating that a single tax rate would increase the indirect tax burden on the common man, the possibility of such an amendment is a non-acceptable possibility for now. The Prime Minister also played down the Congress party’s demand for a uniform 18% rate citing inevitable price increase in necessary daily use commodities and food items. Reportedly, food items are zero-rated under the present GST provisions. A uniform tax rate would impact the price of daily use of consumer products.
The Prime Minister also highlighted some of the landmark achievements in the Post-GST era. These include:
- 70% increase in indirect taxpayer base post-GST implementation.
- GST subsumed 17 taxes and 23 cesses into one single tax.
- 48 lakh new taxpayers registered under GST (The total number of pre-GST registered taxpayers stood at 66 lakh).
- Freedom from the clutches of ‘Inspector Raj’.
- Development of a more robust and transparent logistics network: Boosting business efficiency.
“The government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have 0% tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down. Be it rice, wheat, sugar, spices, etc, total tax levied has been reduced in most cases. A large number of items of daily usage are either exempted or in 5% slab. Some 95% items fall in/below the 18% slab,” he said.
“Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers, if GST were indeed very complex?” he asked. “Check-posts across the country have been abolished and there are no more queues at State borders. Not only are truck drivers saving precious time but also the logistics sector is getting a boost and thereby increasing the productivity of our country. Would this be happening if GST was complex?”
These are some key points that lay the foundation for a more connected and transparent economy. The same points were highlighted by the Prime Minister while addressing The 3rd Annual AIIB meet. AIIB is a multilateral financial institution set up with the aim of meeting the daunting infrastructure requirement of very fast developing economies like INDIA.
A Closer Look
On paper, GST might seem like just another VAT that subsumes the erstwhile 17 taxes, 23 cesses into one single tax. True but on the other side of the coin is the robust IT infrastructure that underpins GST. It is this IT infrastructure that GST draws its prowess from.
The new tax regime, which subsumed Central levies like excise duty and service tax and State taxes like VAT, is aimed at making indirect taxation “simple” while eliminating the ‘Inspector Raj’, he said, adding the GST is an evolving system which is calibrated based on feedback from State governments, trades and other stakeholders.
“The GST has been designed to eliminate Inspector Raj with the help of information technology. From returns to refund, everything happens online”, the PM said. Further, while referring to the teething troubles that marred the initial few months the Prime Minister said, “When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system. There are often teething troubles seen when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time”.
The Pm believes that GST is a shining Example of India’s Cooperative Federalism. In sharp contrast to the earlier Central Government, the present Government successfully managed to bring all participating states on one Table and draw a consensus. GST was a massive change whose single prerequisite was a large-scale overhaul of the prevalent economic system.
The Middle Way
“Can we have milk and Mercedes at the same rate?”… was the reply of the Prime Minister while answering on the question of Uniform Tax Rate. He also stressed that under GST what you see is what you pay.
The interview of the Prime Minister does take us to 1st of July, 2017. On that day, while addressing the Nation on the eve of GST the Prime Minister had made reference to the time when the Constitution of the Nation was in its drafting stage. The Prime Minister had said, “Between many great debates, agreements and disagreements, chalking a new path, adopting the middle path when they would go astray, was born the Indian Constitution!”.
The GST was more than just a new tax reform. It was a giant leap. And one year down the line there is no doubt that the GST in its present form has had an important impact but the scope of improvement is still there. The GDP is back to the 7% mark but still, the aim, for now, should be a day when a uniform tax becomes a reality!!!
Actual Conditions Under GST
The recent interview is in tune with the first anniversary of GST. To some extent, the Prime Minister chose to stand on the brighter side of the things as of now. The Prime Minister, however, did accept that there is always room for improvement and assured proactive measures for the same.
The first and major concern for the Government would be to keep the IT infrastructure that binds this complex structure to cent-per cent efficient all the time. Technical Glitches during teething stages were acceptable but for the times ahead GST’s IT Framework needs to be robust and running all the time.
Next is the GST Ambiguities. Each passing day since July 1st, 2017, has witnessed at least one change in the form of amendments or circulars. The government has no doubt pro-actively made changes based on feedback. But constant tinkering has left companies seriously vulnerable. Traditional MSME Sector is the most affected by it.
Last but not the least is the increasing litigation. The constant changes have made enough room for litigations and disputes. The increasing writ petitions cement this fact. Notices have been served for discrepancies in ITC claims as well as transitional credit.
However, the rulings from the National Anti-Profiteering Authority (NAA) under Goods and Services Tax (GST) regime has been in favour of the business houses. This means that the confusion over GST provisions still remains. Established businesses stand little top lose from notices or summons, as they can afford legal services or accountancy services. It is the small business owners whose plight must be understood. The Single Return Form could be one good answer to the small business owners.
Hence, GST has no doubt increased compliance and made tax evasion difficult. It has, however, disrupted longstanding traditional source of income of the common man. An alternate transition for such businesses or a compensation could be a welcome move.
