Chanakya further wrote that the tax should be easy to calculate, convenient to pay, inexpensive to administer and equitable in its burden! Was GST like this great man's thoughts?
Over the period of last one year, GST is perhaps much discussed but less understood. There is even a popular joke which is making rounds in which a man laments that 'woman, Offside in football and GST' are the three things which he has not yet understood!
Late entry:
We were late to join the GST bandwagon. Already nearly 140 countries have implemented GST, and France was the first to introduce the reform during 1954. The idea of GST was first mooted by our former P.M. Sri.A.B.Vajpayee during 2002.
GST is a destination based tax. If a car is manufactured in Tamil Nadu and sold in Bihar, Bihar gets the benefit of GST and not Tamil Nadu!
Seamless flow of tax credits:
Adjustment of Input Tax Credit (ITC) and refunds needed submission of the following basic monthly returns from the traders.
GST Council
GST Tax structure:
Key items like electricity, alcohol for human consumption, petroleum goods and real estate are outside the ambit of GST. Bringing them under GST control may need more time.
GST ups & downs:
Last one year has been a period of roller-coaster ride to the ambitiously introduced GST. First let us count the gains.
2.Tax base has expanded with GST up to 112 lakh registered businessmen, virtually doubling the numbers when compared to last year.
3.About 62.5 lakh (56%) businessmen have filed GST returns during May 2018, indicating great improvement in compliance, although this is one area which should improve.
4.Number of Income Tax returns filed has further increased up to 6.84 crores when compared to 5.43 crores of the previous year. GST is ensuring better collections under direct taxes too.
5.India has registered a big jump among competing countries on the ladder of easy of doing business to 100 from 130, after introduction of GST.
6.GDP growth rate of the country has also found its rhythm back to around 7%, after withstanding the twin shocks of demonetization and GST.
7.Inflation is under control, despite oil price shocks. 0% slab on essential items has helped greatly.
8.Movement of trucks inter-state has become smoother with the removal of border check-posts, as now entire country has come under a single tax rate system. This has substantially reduced inspector raj, corruption, fuel and labour cost. With time saved trucks can now perform more trips.
9. Corporates have added about 50 lakh more workers during last 1 year under their formal Pay-roll and EPFO. This has lead to input tax credits and refunds to the employers under GST. This can be viewed as creation of more jobs!
It's time to improve!
There are as many as 7 slabs (0% to 28%) including exempted goods, which needs reduction. 12% and 18% slabs could be merged to have one slab. Items like Cement must be brought down from 28% slab! Better compliance and collection of taxes will enable authorities in reducing GST slabs and rates.
2.GST returns simplification
Small businessmen numbering about 5 crores hardly understand GST and its system. They don't have money to employ tax consultants, buy computers and software. GST Network should be made simpler, faster and easiest to access. Just by generation of invoice in the system at the time of sale, all needed returns should get auto-populated resulting in release of Input Tax Credits and refunds. Good to know that steps are already initiated towards this end.
Once the system and returns are simplified, all the pending returns and pending taxes from small businessmen should be waived, so that a stricter new beginning could be made.
However right now businessmen with annual turnover below Rs.20 lakhs are exempt from the ambit of GST. Also for those whose annual turnover is below 1.50 crores can opt for a special composite scheme who can submit just one return in a quarter.
3.Multiple registration requirements should go. In many cases still registration is required in all states. Multiple returns, audits and assessments will ruin the time, energy and money of our businessmen.
4.Exporters are experiencing great difficulty in obtaining tax refunds. Reportedly 25,000 crores of rupees of refund are held up causing squeeze of working capital to them. This problem should be immediately looked into besides easing of the system for future.
5.The benefits of GST does not seem to have reached the consumers. For example although even AC restaurant GST is now reduced to just 5% from 18%, rates have not come down for the consumer. Probably they have increased the rates neutralizing the good effect of GST reduction. Anti-profiteering agency constituted for this purpose must monitor these aspects.
6.Tax on services has gone up from 15% to 18%. Services like Banking and Insurance have become costlier. There is need to look into this problem.
Obviously achievements under GST have outnumbered certain lacunae which are being addressed by our authorities. There is every reason to believe that our GST system will settle further bring in much more than the anticipated benefits.
In the meanwhile there is a disturbing news from Malaysia which
In India we are witnessing an era wherein our political parties go more by populist measures, ignoring what is good for the country in the long run. Let us hope nothing happens in India which may undo all the good work so far done under GST.
Thanks:
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