Nagpur: Last session of the parliament was washed out by ongoing protests by congress and other parties. It still seems a little difficult that things will change for this session as the political game is currently red hot. The latest fallout over the JNU imbroglio, the fury over Jaat reservations and Rohit Vemula’s suicide row none of these are helping the government in anyway getting the bill passed in both the houses. If the GST bill is passed, we can expect a climate of improved tax compliance in India.
The Good and Services Tax or the GST is the biggest indirect tax reform since 1947. This will be levied on manufacture sale and consumption of goods and services. The GST bill will lead to the economic integration of India.
The main function of the GST is to transform India into a uniform market by breaking the current fiscal barrier between states. Thus the GST will facilitate a uniform tax levied on goods and services across the country. The Current indirect tax system in India is complicated with overlapping taxes levied by the Centre and the State separately. Making the tax tier system very complicated. The GST will replace indirect taxes and centralize the system of taxation thus mushrooming of tax tier system under one umbrella. It also offers a solution to the MNCs breaking the indirect tax structure into one single payable tax .
All forms of taxes such as excise duty, service, central sales tax, VAT ( value added tax), entry tax or octroi will all be subsumed by the GST under a single umbrella. It is expected that the GST will be an instrumental helping the GDP of India to grow by 2 percent.
The GST is said to have ‘dual’ system, having two components- the Central GST and the State GST both having separate powers to legislate and administer their respective taxes. Thus equally empowering both. Forms of government and resolving tax conflict currently between state and center.
There are apprehension of state governments for loss of fiscal powers, to which bill has promised to solve by giving compensation packages for three years for any loss in revenue. The first time the bill was heard of was way back in 2009 during UPA government term which opened a discussion on it. They successfully introduced the bill but eventually failed to get it passed from houses.
Currently the bill needs two-third majority of both the houses and 50 percent of the state assemblies will have to ratify it. It is stuck in the Rajya Sabha, because the current government does not hold a majority here.
Three main concerns of the Congress over the bill are:
– One per cent additional tax as goods move across states.
– The constitutional cap of 18 per cent and an independent dispute redressal mechanism.
– The party has maintained that the government was ignoring the concerns raised by the party on the legislation.
Even if the Bill is passed in the budget session and all states pass their respective Bills by August, it will take time for companies to put their systems in order to finalise their accounts and pay GST. While small firms may be able to manage, large firms with operations in different states will find it very difficult. Companies will need at least six months to transition.
So does that mean there will be a lot of disruption in the initial phases? Under VAT, the first year was a bit problematic, but the system has now stabilised and it can smoothen the way for GST.
There are far too many things to be ironed out, Yet the government is walking an extra mile to get consensus for implementation of GST, we have to hold our breaths and keep our fingers crossed hoping for the best.
Dr. Rajan Pandey
M.B.B.S., M.D. Radio-Diagnosis(schol.),
Blogger, Columnist and aSocial Reformist