Review of GST implementation

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Search 17^th July 2017 http://www.newsonair.com/Main_Audio_Bulletins_Search.aspx

TOPIC:

General Studies 2

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

General Studies 3

• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

The GST implementation has become a reality. The centre and states have lost their sovereignty in the capacity of power to levy and collect indirect taxes and now are entwined through a unified taxation system. There is a single revenue, neutral rate across the board in every state all over the country. However, the implementation so far has been an issue of turmoil. The GST Council has held the meetings time to time which confronted various views of end users, industrialists, workers, traders to rationalise the rate structure.

GST has been framed as a law. It has a common pool of taxes. It is going to have a removal of the cascading effect of tax. In today’s date, the value added tax would be added by the intermediaries. Each person as a contributory will be taken as an intermediary. Any time the government has shifted or changed from a structural set of norms to another structure, that transition has had original kind of hiccups. The small traders are still hesitant and shy of coming into the GST portal.

Some problems faced

1. Territorial questions
2. Product classification
3. Rate at which products are to be charged
4. The reverse charge mechanism
5. Goods produced in one state consumed in another state
6. Goods sold through e-commerce

How they help small traders?

The threshold exemption is 20 lakh for traders. There are 80000 small traders still hesitant to enter the GST. Maybe they are not aware of computer or the taxation or are not willing to leave the traditional way of doing things or are not willing to be transparent. If a trader has business of more than 20 lakhs, but he would be not wiling to make an analytical kind of disclosure, there is a composition scheme which has an ad hoc levy. It doesn’t go into detailed classification and makes a flat payment.

With transparency, the supply of GST will increase the output as well.

Boost to economy

Indian economy closely resembles to Canada. Canada had similar structure and post GST, it reduced taxes by about 40% by rationalising and restructuring. This had generated a jump of 27% in GDP in Canada.

Thus, GDP in India is also going to rise more than before. This will happen because taxes are going down eventually and the economy will build up. Once the taxes are going down, the central and state government are collecting less taxes and the business profits are staying in economy. These profits can be rolled into the same productivity and products and services.

If there is compliance and transparency, the unorganized economy will soon be brought into the regular economy.

Rationalization of tax rates in textile sectors.

Textile employs highest number of employees, including handicrafts sector also. Government announced GST roll out, the strike started in various sectors. This was not an organized but a genuine strike which made the government look into the matter. There was a genuine problem so government has been flexible and open to suggestions. The issue was not politicized and constantly tried to find way ahead to reduce taxes.

Agriculture

Agricultural equipment was up for modernization. That will stimulate the manufacturing sector. There cannot be high tax rate on this sector. So the tax rate on tractors had reduced its demand. Sprinklers, irrigation modes, nuanced agricultural products will see a reduction in taxes. This will stimulate the manufacturing, banking and credit sector. It will create a modernized concept of agriculture.

e-way bill

Government has granted exemption for any bill or any tax on certain items of mass consumptions including vegetables, fruits, food grains, meat, bread, curd, books and jewellery. Also, e-way bill will also not be required if goods are transported by a non-motorised conveyance and if the goods are being transported from a port, airport, air cargo complex and land customs station to an inland container depot or a container freight station for clearance by customs. E-way bill concerns the ferrying of goods worth more than Rs 50,000 within or outside a state under the GST regime, whereby, transportation of goods will require securing an e-way bill by prior online registration of the consignment.

The taxes will have to be paid eventually. How best to use the modern technology to make it easy on daily basis is more important. This will help in faster movement of goods and help keep check on movement of goods. Lower transport costs means lower prices. Cost of production will automatically come down.

Removal of octrois and check posts will push the economy to work at a faster pace. If goods and services are able to be transported at a faster rate, that increases pace of development in economy and thus GST can push up GDP by 1-2% in near future.

Anti-profiteering law

It has come to notice of government that the traders were not passing the benefit of GST to the consumers. The anti-profiteering law is being taken care of.

The central and the state government will together start the awareness campaign to educate the traders as well as industry about the measures intended to bring and also pass on the credit to the customer. The government has taken a decision of supplying answer through FAQs. Government should bring more enforcement to make the consumer the bigger gainer. More awareness is the key to have positive effects of GST.

The technology is going to drive GST regime. There will not be any interfacing with officers and it will have much impact on the cost of transactions. As long as it is technology driven, there will be confidence in the system.

National anti-profiteering authority- All regulatory bodies should have centralized body which will give directions to the state. Unless there is a regulator at centralized level with a clear mandate, they cannot advise anyone and bring strictness into implementation.

Connecting the dots:

• GST is prime example of cooperative federalism. Do you agree? Give reasons for your analysis.