Dr. D. Mukhopadhyay
The “Book of Genesis” suggests that one-fifth of all crops should be given to the Pharaoh. The ancient Greece imposed eishpora to pay for wars. Athens imposed a monthly poll tax on foreigners. Imperial Rome used tribute collected from colonized peoples to multiply the bounty of the empire. Julius Caesar had imposed a one-percent sales tax and Augustus did institute an inheritance tax to provide retirement funds for the military. Indian tax system is also quite old. India has got a well-structured taxation system wherein an authoritative segregation has been done among the Local Bodies like Municipalities and Corporations, the State Governments and the Central Governments. The Department of Revenue, Ministry of Finance, Government of India is entrusted with the responsibilities for fiscal calculation of the country. The Department of Revenue, Ministry of Finance, levy taxes on individuals, industry houses or business organizations for their income, excise, customs, services rendered or received by them to or from others in the commercial and economic markets. Agriculture tax is levied by the respective State Governments and this does not come under the jurisdiction of the Central Government. During last two more decades, lot of discussions and deliberations on the issues concerning simplifying Indian tax was in vogue and the fiscal system received due attention of the decision makers and GST is one of the tax reforms tasks adopted by the Central government. Experts are of the view that this is the major tax reforms agenda of the Government of India since independence of India. Another area i.e. tax reforms on direct taxes through implementation of Direct Taxes Code is lying pending for active consideration of the Government of India. The Constitution (One Hundred and First Amendment) Act, 2016 , paved the path for introduction of GST in India . Let us have a bird’s eye view on the impact of the newly GST Act, 2017 on the national economy which came into being throughout the length and breadth of the country.
The Goods and Service Tax became a reality by dint of GST Act , 2017 which came into force on 1st July, 2017. GST is fundamentally based on the premise of one nation, one tax and one market principles. It aimed at unifying the $2 trillion economy and 1.3 billion people of India into a common market. Under GST, goods and services are subject to five categories of tax rates and they are 0%, 5%, 12%, 18% and 28 % as were mentioned in the preamble of newly introduced GST System. Thereafter, the same have been reviewed by the Government keeping parity with the requirements of practical and pragmatic implications and impacts of GST on different sections of the people in general and on Indian economy in particular. As far as corporates are concerned, the elimination of multiple taxes is gradually accruing benefits towards ease of doing business. The principal reason for introducing GST is to streamline the compliance procedure, collection of taxes at reasonable cost and making tax avoidance difficult. There are four types of GST and they are SGST (State GST being collected by the State Governments), CGST (Central GST, being collected by the Central Government), IGST (Integrated GST , being collected by the Central Government and State Governments) and UTGST (Union Territory GST, being collected by the Union Territories of India. GST is a single indirect taxation system and it all the indirect taxes into one basket.
Most of the countries practice on first three types of GST system while Countries like Canada follow dual GST system and they are indirect taxes imposed by both the Central and State Governments. GST is a single indirect tax which are levied on the goods and services which are sold in the market. GST is embodiment of central excise duty, central sales tax, service tax, additional duty on customs etc. Indirect taxes of State Governments like State- VAT, Purchase Tax, Luxury Tax and Tax on Lottery and Gambling are replaced by SGST. The basic objectives of GST include elimination of cascading effects of tax on production and distribution of goods and services, to accrue benefits of cascading effect of tax to the manufacturer and consumer in general, to obviate the limitations of the State level value added tax system. The most important feature of the GST is to exempt in a financial year up to Rs. 20 lakhs and Rs. 10 lakhs of turnover for North Eastern States and Special Category States. This would encourage small entrepreneurs to start the business of their own.
The GST that came into being in July, 2017 subsumed all the all indirect taxes under a single umbrella at the Centre and State levels. This tax system has widened tax base and makes it more transparent. The consumers know that how much taxes they are to bear and on what base. This helps enjoying the benefits of cost-competitiveness to the manufacturing sectors since tax on tax(i.e. cascading effect) is done away with after introduction of GST. It may be observed that inflation is more or less stationary now. In other words, GST has brought down the prices of goods and services which in turn is increasing demand and consumption of goods and services by the consumers. Prices of consumers goods have come down owing to the fact that lower burden of tax on the manufacturers hence the low cost of production. Customs duties that are loadable on the import and export of goods have been removed under this tax system and it leads to increased cost – competitiveness in the foreign market by lowering the cost of transaction. There is more transparency and hence less degree of corruption in fiscal system that garners the revenue to the national exchequers. There has been judicious curb on the circulation of unaccounted money normally practiced by the shopkeepers and traders and a automatic check and balance has been put in place by implementation of the GST Act, 2017. The GST Act, 2017 has been working successfully during last eight months by ensuring transparent and easy compliance, removal of cascading effect and increasing the degree of cost competitiveness for the corporate sector and industrial sectors by and large. Secondly, consumers are getting benefitted by having a single point tax and low inflationary effect on the purchase and consumption of daily consumable for the consumers at large and finally, GST is easy and simple to administer, ensures better control on revenue leakage, consolidation of tax base and higher effective and efficient revenue collection at low cost of collection. Under no circumstances, cost of collection of tax should be more than the quantum of tax so collectable or collected and this is ensured by the present GST system.
On the other hand , as adverse impact of GST, real estate market has badly been affected by GST . Roughly home buying prices have increased by 8% to 10% and it has eclipsed the buyers’ market by 12% to 15%. Moreover, for the consumers, prices of some goods and services have declined whereas the prices of some other goods and services have increased simultaneously and it neutralized the benefits of GST in favaour of the consumers. Services like telecom, airlines, banking became more expensive than before and these are going to have adverse effect on the expansion of the respective markets. To be specific, there has been direct hike in service tax from 14% to 20% or more . The worst sufferer is the telecom sector which assumes a serious proportion when India’s rural teledensity is far below and not even 50%. Under the new tax system, there is likely an increase in tax rates from 14.5% to a range between 29% to 43% for the drivers who do not own cars and sustain on Ola and Uber cab-leasing schemes and programmes. It is worth mentioning that E-Commerce websites that include Flipkart and Amazon. in are to collect tax at source by 10% and pay this to the sellers listed on their websites and therefore this action shall definitely have adverse impact making online shopping more expensive. It is important to mention that hike in liquor and petroleum products under the newly introduced GST are contributing to inflation.
Despite of the above problems, It can be stated that removal of all the barriers on introduction of GST uniformly across the nation expect India to be a common market or destination of the foreign investors besides an encouragement to the domestic merchant class to do the business at ease. In the long run GST shall have favourable impact on the business community and the consumers though it suffered from initial teething troubles. GST shall provide relief to both the producers as well as consumers by providing input tax credit set off, service tax set off and subsuming other indirect takes. GST is expected to generate fiscal gain for both the Central as well as the State Governments through widening indirect tax base and brining about considerable improvement in tax compliance. The Government of India should take necessary initiatives to educate both the producers and consumers to practice the GST without any apprehension of adverse impact. In overall management GST regimes, the Institute of Chartered Accountants of India(ICAI), the Institute of Cost Accountants of India(ICAI-CMA) and the Institute of Company Secretaries of India (ICSI) can play pragmatic and very important roles and these national level institutions should be made catalyst for giving readymade solutions to the producers and consumers relating to GST regime management. It is believed that the decision makers shall take into cognizance the post GST implemented problems highlighted above in the best interests of the producers, consumers and the nation and large and would make it more users’ friendly.
(The Author is Professor of Management, School of Business and Dean-Faculty of Management, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir, India)
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