Confusion still surrounds GST

It is over a week now that the Goods and Services Tax (GST) has come into force throughout the country. But confusion still persists in the trading community – from the big wholesaler to the pavement vendor. There are other areas of ambiguity also. The first question that arises is, what was the hurry for the Government to introduce it on 1st of July, before clearing all the confusion that surrounds it? A rather strange argument the Government has adduced is that GST will help increase India’s GDP. It passes understanding how a tax can help increase GDP. No convincing argument about this has been put forward by the Government. It has been argued that by replacing different taxes in different States plus Central taxes and introducing a single tax throughout the country, taxation system will be simplified and the total tax will come down.
But this is easier to say than to implement. Traders point out that on some commodities like textiles there was no tax earlier. Now a five per cent tax has been levied. It will raise prices of all textile products. But a big point is that earlier any trader could start a business by obtaining a trade licence from the local civic body. Now they have to maintain detailed accounts to conform to the requirements of the GST. They will have to employ persons familiar with accounting methods. Also computers will have to be used to maintain detailed records of transactions. It will require more investment in infrastructure. The worst hit will be the small and medium traders. They will find it hard to exist.
There are certain other anomalies. For viewing locally produced  films in cinema halls (their new name is mall) viewers will have to pay 18 per cent GST for tickets costing less than Rs. 100 and 28 per cent for tickets costing over Rs. 100, Nowadays, even in small towns no cinema ticket is available at less than Rs. 100. An impost of 28 per cent GST will lead to a fall in viewership. Former Union Finance Minister P. Chidambaram wanted to limit the highest slab of GST at 18 per cent. That should have been done. Better still would have been to impose a single slab of tax on all commodities. In Australia there is a flat 20 per cent tax on all goods and services. In Canada it is 20 per cent. A flat rate of tax on all commodities and services would have made things much simpler for both the seller and the buyer.

Monday, 10 July, 2017