India’s tryst with GST

The Goods and Services Tax came into force at the stroke of midnight of July 1. The Government and its agencies including sections of the media are claiming that it is a never-before step taken in the field of taxation in India. By replacing all other commercial taxes in all other States, the GST has realized the goal of ‘One country, one nation, one tax’. How it works out on ground, however, remains to be seen. Budget and taxation policy reflect the political aim of the Government. The GST is no exception. Certain provisions of the GST have already created apprehension among the trading community. The power to arrest persons believed to have committed an offence under Section 132 of the GST law, in particular, is one such. Though the Government has claimed that the GST will put an end to the ‘Inspector Raj` but provisions in the law like this have created considerable doubt.
The Opposition has alleged that through the demonetization policy and forcing the economy to become as much ‘cashless’ as possible, the Government is trying to control, or at least keep watch on all monetary transactions. And the object is not purely altruistic. What impact will the GST make on different sections of the trading community and whether dishonest traders cannot find out some flaw in the law to fleece the consumers, are all matters of speculation now. More questions remain. A few States like West Bengal have decided not to introduce the GST, at least for now. Union Finance Minister Arun Jaitley has warned these States that they will disqualify for getting compensation from the Centre for the loss of revenue that may have to suffer due to the GST for the first five years. If these States remain firm in their decision they will have to face revenue loss.
Some eminent economists have expressed their fear that like demonetization, the Centre has taken another wrong step by introducing the GST. Even ardent supporters of the GST have admitted, rather euphemistically, that “no transition from one system to another can be seamless” meaning there may be problems during the transition period. The nature and severity of the problems will be known gradually. There is apprehension among the general public whether the rate of GST fixed for different commodities will be actually applied by the traders, or whether consumers will have to pay more by tricky interpretation of the law. The answers to all these questions and about the impact of the GST on the economy as a whole lie in the womb of the future.

Wednesday, 5 July, 2017