Policy decisions can be of two kinds- the first are those that take some time before they could deliver financial benefits, for example development of highways and ports, while the others fetch returns almost immediately, for example linking Aadhaar with MGNREGS and central scholarships to curb leakages. Goods and Services tax (GST) also falls in the second category.The new tax regime that subsumes most of state taxes and central levies can certainly be termed as the most defining reform initiated by the BJP-led government.
It’s been almost a year that the indirect tax reform changed the way our businesses and consumers interact with each other, and the time is ripe to conclude whether the celebrations are all hype and rhetoric or GST truly delivered on its promise.
Every market analyst would talk about certain positive aspects of GST, such as simplification of hitherto complex indirect tax structure, removal of cascading, uniformity through similar rates across all states, rationalization of levies on goods and services and ease of filing returns under a single user-interface. But these macro benefits aren’t enough to understand GST in its entirety; for the same one would need to notice signs at the micro level.
Accept it, India is a country where acute income disparity still prevails and lifting millions out of poverty is a work-in-progress.
Therefore, no policy decision that fails to live up to the dreams of those at the bottom of the pyramid is a laudable decision. What about GST? ‘One nation, one tax’ rhetoric aside, the new tax system has played a key role in formalizing the Indian economy, a precursor to equitable distribution of national income. The predecessor to GST in terms of policy action was demonetisation and the dual strike on the hitherto opaque economy has paved the way for transparency and compliance.
Have you ever wondered what makes urban cities more developed than rural parts? It’s the way people are integrated with the formal economy in urban parts, with enterprises adhering to laws related to minimum wages, working hours, contribution to social security schemes and retrenchment of employees, which leads to an atmosphere of heightened social and financial well-being. GST has delivered enormously on this aspect.
Let’s look at the numbers. Amidst the opposition cry of a jobless growth, the Employees’ Provident Fund Organisation (EPFO) numbers depict a contrasting picture. The body has reported that 41 lakh jobs were created in the formal sector during September 2017 to April 2018.
This can be construed as many employers going for formalization of their workforce by subscribing to social security schemes as well as many small enterprises opting to formalize their operations in the wake of the compulsion that their customers in the supply chain will prefer to do business with only those who pay their due share of GST so that credit for input taxes is claimed.Government’s decision to subsidise firms’ outlays on contribution to social security schemes for employees also played a supplementary role.
With a true and fair picture of value addition (sum on which GST is levied) and expenditure on wages and salaries comes overall transparency in the system, which leads to reduced tax evasion (both indirect and direct) and an overall addition to state resources that is used not only to build new schools, hospitals, roads and bridges but also to recapitalise ailing public sector banks.
Another area where GST scored a winner is uplifting the sentiments of businesses and investors by infusing predictability.
As per the Deloitte India’s survey of chief financial officers, more than three-fourth of responding executives are said to hold the belief that ‘GST has had a positive impact’. It also says that 57 percent of respondents look forward to ‘taking greater risks’, a move that can eventually lead to double digit GDP growth rate. New roles within existing enterprises are already being created for new skill sets ranging from online filing of GST returns to working on e-way bills.
Without a doubt, the new tax regime did come with its set of initial glitches and regularalterations leading to an atmosphere of anxiety. But what else did the detractors expect- a single-stroke implementation of a reform that has fundamentally changed the way businesses interact within the economy? Critics are to remember that the western world’s Brexit couldn’t be executed in a day or a month.
Many areas demand improvements. From time-bound refund of input tax so as to ease the pain of exporters to further simplifying GST returns and assuring an unfailing IT infrastructure for GST network, government seems committed to addressing concerns, besides further rationalizing tax rates on various goods and services.
Critics must further note that tax compliance under GST is steadily rising indicating that the new regime is settling in much faster than anticipated. More businesses filed summary sales return in May 2018 as compared to the preceding month and the gross revenue collection in May was higher than the monthly average of GST collection in FY2017.
As far as bringing petroleum products under GST is concerned, we are to understand that this is related more to centre-state political equation than to economic sense. States levy ad-valorem tax on petrol and diesel and this levy contributes substantially to state governments’ resources. Hence,neither would states be willing to accept reducing tax to the highest GST rate of 28 percent nor creatingyet-another GST slab seemsa wise idea.
In a recent development, the GST Council is said to be prepared to bring aviation turbine fuel (ATF) and natural gas under GST. If done, this can pave the way to ultimately bring even petrol and diesel under the new tax regime, provided that states astutely look for other sources to generate funds for their budgets. The best alternative is to contain their respective deficit to GSDP ratios by limiting expenditures such as loan waivers.
After one year of GST, what needs to be celebrated is the way it incentivizes enterprises to move towards formal sector. With more and more small and medium enterprises entering the formal economy and companies registering their employees with social security schemes and abiding by minimum wages and retrenchment rules, the wide gap in income distribution will slowly but certainly fade away, giving rise to a new inclusive India.
Opposition parties were once critical of GST but now they have no issues with this. This shows how their criticism was totally unfounded and just for the sake of gaining attention of media and public.
Any reform measure takes time to settle and GST is one of the most radical changes in recent past. At least a period of 5 years must be given to this new regime to settle down and work smoothly.
Global trade is already uncder stress due to protectionist and inward looking policies of governments of USA and China. Indian exporters are additionally being hit with delay in credit of input taxes.
India cannot have a single slab GST because the welfare government of country cannot tax milk and luxury cars at same rates. Hence anyone criticising multiple slabs is on the wrong side.
Just like indirect tax, the government should also bring changes to direct tax by reducing tax rates for smaller enterprises and increasing them for companies that have low input costs like IT sector.
If someone says that by introducing similar indirect tax rate for goods and services across the country will undermine federal structure, he must know that GST council comprises of states as well.
GST is a laudable work of government and its socio-economic benefits will be many. It will not only increase tax collection but it will also provide increased opportunities to youth for employment.
States earn a major chunk of their revenue from levies on petrol and diesel hence expecting them to allow bring these commodities under GST is a dream. At least for next 2 years the scheme will not change.
It is true that economy has been formalised by GST in a way that more and more enterprises are turning to paying their share of taxes and reporting their revenues in true and fair manner.
The rate structure is vague and it has to be rationalised so that more everyday goods and services attract less levies. The 28% slab has to go since it inflates the costs too much.
Complete and relevant. Very accurate.
Thanks for helping out, wonderful info .
Great task on this publish. I enjoy the way you displayed your info as well as the way a person achieved it significant and also obvious to be aware of. Thanks a great deal.
I blog often and I really thank you for your content. This great article has truly peaked my interest. I am going to book mark your website and keep checking for new information about once per week.
Just spent a few very enjoyable minutes looking at the site. Excellent. Well done. Overall very good: clean, easy to navigate, informative and, importantly, interesting.
Rarely do I come across a blog that is both educative and amusing, and without a doubt, you’ve hit the nail on the head.
So wonderful to discover someone with some unique thoughts on this issue.
I look forward to reading your next informative work soon. Thank You.
Spot on with this write-up, I absolutely believe that this amazing site needs much more attention. I will probably be returning to read through more, thanks for the advice.
I like the way you put thoughts forward
It was definitely informative.
Your article has truly peaked my interest.
Thank you for the introduction to the new website. I will be re-visiting it many times, but on a fast run-through it looks really great.
I am very happy to find this web site. I wanted to thank you for your time due to this fantastic read. I definitely liked every little bit of it and i also have you saved to fav to see new information in your site.
I am regular visitor, how are you everybody. This post posted at this web page is really pleasant.
Information provided by you is of great help. Will likely be back to get more. Thank you
Congratulations for all the effort putten in to reach to such explanatory and efficient article.
Multiflavour … Nice thought, thanks.
Hi there. This post could not be written any better. Thank you for sharing.
Very descriptive article. I enjoyed it a lot. Waiting to see next article soon.
Hello, its my first time to commenting any post. But I could not stop myself from commenting on reading through such a sensible piece of writing.
An intriguing discussion is definitely worth comment. I do believe that you ought to publish more on this issue, it may not be a taboo matter but typically people do not speak about such topics. To the next. Cheers..
I honestly appreciate people like you. Take care..
Just wanted to say how much we appreciate the tremendous amount of hard work and effort you all put in to producing this website. It is a great credit to everyone and I am sure will be a great success.
I really appreciate your efforts and I will be waiting for your further write ups thanks once again.
Nice post. I learn something totally new and challenging on sites I stumbleupon everyday.
Great article. Keep writing such kind of information on your site. Im really impressed by your blog.
I do not even know how I ended up here, however I assumed this publish was great. I do not recognize who you are however certainly you are going to a well-known blogger in the event you are not already. Cheers.
I definitely enjoyed every bit of it.
Nice post. I learn something new and challenging on websites I stumbleupon everyday. It is always interesting to read through content from other authors and practice something from their web sites.
I could not refrain from commenting. Exceptionally well written.
Looking forward to read more of your stuff.
I was able to find good advice from your blog articles.
Let me encourage your attention to details which puts you at the top amongst all the bloggers.
Thanks for the marvelous posting. I genuinely enjoyed reading it, you are a great author. I will always bookmark your blog and will come back very soon. I want to encourage that you continue your great work,have a nice day.
You definitely put a fresh spin on a subject that is been discussed for years. Wonderful stuff, just excellent.
I need to to thank you for this wonderful read.. I certainly loved every little bit of it. I have got you book-marked to look at new stuff you post…
Way cool. Some extremely valid points. I appreciate you penning this post and the rest of the website is really good.
I gotta favorite this internet site it seems very useful very helpful
it is actually a nice and helpful piece of information. I am satisfied that you just shared this helpful info with us. Please keep us informed like this.
You are so awesome. I do not believe I have read through a single thing like this before
Very good information. Lucky me I ran across your blog by accident
Remarkable! Its actually remarkable piece of writing, I have got much clear idea on the topic of from this paragraph.|
An article of great help and value.
Your article has been an inspiration to me. It has given me hope. Keep up the good work.
Kudos for putting up such an amazing work.
I could not refrain from commenting. Perfectly written.
Oh my goodness. Amazing article dude. Thank you so much
An enlightening work.
The site looks absolutely fantastic. Well done to all involved. Very professional & the navigation is great too. Cheers.
Just a quick note to appreciate you for your outstanding work on post.
Pretty. This has been a really wonderful article. Thanks for supplying these details
I wonder how come you get to know that this is the exact information that I have been looking for. Thanks a ton man.
I just want to say I am just all new to blogging and site-building and absolutely enjoyed this web site. Likely I want to bookmark your site . You actually come with amazing writings. Bless you for sharing your web page.
Keep up the good work.
You have made some decent points there.
Keep the good articles coming.
Excellent weblog right here. Also your site loads up very fast. I want my website loaded up as quickly as yours lol
I appreciate you finding the time and effort to put this information together. I once again find myself personally spending a significant amount of time both reading and commenting.
I am often to blogging and i really appreciate your content. The article has actually peaks my interest. I am going to bookmark your web site and keep checking for brand new information.
I just had to drop you a line to let you know that John and I think that the website is BRILLIANT……………………… Well done.
Great delivery. Sound arguments. Keep up the amazing spirit.
I am amazed, I have to admit.
This is undoubtedly the most clean and clear form of writing that have seen so far. Congrats to attain this level.
I have read so many posts about the blogger lovers however this paragraph is in fact a fastidious paragraph, keep it up.
An outstanding share.
Just wanted to say I love reading through your blog and look forward to all your posts. Carry on the great work.
Ahaa, its pleasant dialogue about this piece of writing at this place at this weblog, I have read all that, so at this time me also commenting here.
I just want to mention I am all new to weblog and truly savored this blog site. Likely I want to bookmark your blog . You actually have terrific articles. With thanks for sharing with us your web site.
It is always exciting to read through articles from other authors and use a little something from other sites.
My family always say that I am killing my time here at net, however I know I am getting know-how all the time by reading such good articles.
After looking at a number of the articles on your website, I really appreciate your way of blogging.
Just finished reading your article and wanted to congratulate you on your compelling abilities. Good luck for the future work.
Hurrah, that is what I was seeking for, what a material. present here at this web site, thanks Dr gupta for this post.
Quality posts is the important to be a focus for the people to visit the web page, that is what this web site is providing.
This was an exceptionally nice post
I can not wait to read much more from you. This is really a tremendous site.
Very good post. I absolutely love this site. Stick with it.
Your article is an impression of your high thinking and great perspective
I totally appreciate your insights. Keep rising.
This site definitely has all of the information and facts I needed concerning this subject and did not know who to ask.
There is certainly a lot to know about this issue. I love all of the points you have made