GST right and wrongs

THAT the GST is a game-changer is not in doubt. All parties and states, barring J&K, have accepted it. The midnight GST launch speeches would have made greater sense had the government been more open to suggestions made by protesters and tried to address their apprehensions. While the government is insisting on the merits of the GST, turning a deaf ear toward those expressing reservations and fears, opposition parties have chosen to side with the protesters. There was an unseemly rush to market the moment. Few disapprove of the concept of GST; it is the changes, digressions and unplanned push that have caused the divide. The BJP focus is on the GST as an “achievement”.

The disconnect with reality is clear but unsurprising. GST hassles that people, particularly those in the unorganised sector, are set to face are more than — what the Prime Minister called — an adjustment of the eyes to the new spectacles. Lack of preparedness in the switchover is self-evident. Tax rates kept changing till the eleventh hour — a cut in the tax on fertilisers and tractor parts and a 10 per cent customs duty on mobile handsets. The tax rates are unreasonably high — 5, 12, 18 and 28 per cent and a cess. Canada has a single 5 per cent GST rate, Singapore 7 per cent and Malaysia 6 per cent. Here we have multiple tax slabs, multiple registrations and multiple filing of tax returns. The supposed goal was to simplify the tax regime.  

Finance Minister Arun Jaitley and Revenue Secretary Hasmukh Adhia have claimed the GST will push GDP growth by 1-1.5 per cent. This has been disputed by one of their own: Niti Aayog member Bibek Debroy. The claim is not evidence-based. Rather the opposite seems more plausible. The cost of compliance, procedural headaches, unleashing of tax inspectors to ensure tax benefits are passed on to consumers and resultant litigation may add to the unease of doing business. Central and state-level politicians on the GST Council have ganged up to extract more from the taxpayers to fund their politics of personal glorification, loan waiver and  freebies. This is despite the GST widening the tax base and tax evasion becoming difficult. The unstated government policy is: spend more, tax more.