Move to ‘rejig’ GST rates most welcome

The Asian Age.

Opinion, Edit

The government has tweaked GST several times since July 1, but the basic flaws haven’t been resolved.

Finance Minister Arun Jaitley (Photo: File/PTI)

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The Centre’s decision to “regij” the anomalies in the Goods and Services Tax (GST) structure is most welcome. GST was launched in a hurry on July 1, by finance minister Arun Jaitley, ignoring the wiser counsel of many, such as West Bengal’s finance minister Amit Mitra, who had suggested caution. Mr Mitra proved to be both prescient and prophetic. He had lobbied for GST’s deferral by around two months, saying that “the world’s largest fiscal reform shouldn’t be implemented with jugaad”. He and many other state finance ministers, who supported him, wanted GST structured in a way that it would benefit both citizens and small traders. It’s a no-brainer that GST, in its present form, won’t achieve this. As GST subsumed around a dozen existing taxes like excise duty, VAT and services tax, it should have simplified the burdensome tax system in line with the “one tax, one nation” principle, bringing transparency and eliminating tax evasion. The way it was conceived was too complex for entities like small traders to fathom, with its multiple categories and sub-categories. The government has tweaked GST several times since July 1, but the basic flaws haven’t been resolved. Its complex structure saw tax collections in September at nearly four million assessees, far below the 6.8 million returns the finance minister expected to be filed in August. One can only hope that the next meeting of the GST Council will address many of the issues that have been thrown up in the past two months.

It is also a matter of great concern that an already declining economy plummeted to the level of 5.7 per cent growth in the last quarter, the lowest in three years.

The pace of the fall was hastened by the implementation of GST. Earlier, the demonetisation of high-value currency notes had disastrous consequences on the economy, particularly in rural India which is a society that largely transacts in cash. The common man and particularly the medium, small and micro industries were put through great hardship. It was the blow to this section that brought the growth rate down.

The SMEs are the backbone of the Indian economy, and account for nearly 80 million jobs, not to mention a significant chunk of exports. The only ones who benefitted by the hasty introduction were the lawyers, Mr Jaitley’s brothers-in-arms, and chartered accountants. Besides, with the all-important Gujarat elections expected to take place in December, Prime Minister Narendra Modi couldn’t afford to have an angry electorate in his home state.

This inept fiddling with the economy was further proved with the poor demand during the festive Diwali season. Now traders are looking forward to the wedding season and hoping to make up their losses.

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