GST vs. Reality: One Nation, One Tax- Possible in Country like India?

Poetic as it may have been, a “ One Nation, One Tax ” was never possible in a diverse and complex federal polity, such as India. But there is much consternation among policy analysts and economists over multiple GST rates rather than just one tax rate for all goods and services.

The historic Goods and Services Tax (GST) regime came a step closer to meet its July 1 target of roll out. With the Lok Sabha approving four supplementary legislations. It passed following after negation of a host of amendments moved by the opposition parties.

1. The Central GST Bill, 2017;
2. The Integrated GST Bill, 2017;
3. The GST (Compensation to States) Bill, 2017; and
4. The Union Territory GST Bill, 2017

• The GST, which will usher in a uniform indirect one tax regime in the country, will make commodities “slightly cheaper”.
• The GST rates would depend upon whether the commodity is used by a rich person or a common man.
• Once government implement the new regime, as one nation one tax,
  • the harassment of businesses by different authorities will end
  • and India will be one tax rate for one commodity throughout the country.
• The GST Council, comprising Finance Ministers of Union and states, had agreed to take a decision on bringing real estate
  • within the ambit of the new tax regime, as one nation one tax, within a year of its rollout.
• Currently government does not take tax on food articles and those will continue as zero rated under the GST. All other commodities would fall into the nearest tax bracket.
• The GST Council has recommended a four-tier tax structure — 5, 12, 18 and 28 per cent.
• On top of the highest slab, government will impose a cess on luxury and demerit goods
  • to compensate the states for revenue loss
  • in the first five years of GST implementation.
• However, earlier the Central GST (CGST) law has pegged the peak rate at 20 per cent
  • and in the State GST (SGST) law,it has prescribed as similar rate,
  • which takes the peak rate to 40 per cent which will come into force only in financial exigencies.
• The cess would be transient for a period of 5 years so that the proceeds can be utilised to compensate the states.
• Touted as the biggest taxation reform since Independence,
  • GST will subsume central excise, service tax, VAT and other local levies
  • to create an uniform market.
  • GST is to boost GDP growth by about 2 per cent and check tax evasion.
• That GST Council is working on the basis of consensus
  • and slowly all items will come within the ambit of the new indirect tax regime, one nation one tax,
  • which will ensure free flow of goods and services throughout the country.
• The concerns expressed by members on bringing agriculturists within the ambit of GST,
  • the GST bill have provided a definition of agriculturists
  • for the purpose of exemption from registration.
  • Besides, most of the agricultural produce would continue as zero rated
  • and there should be “no confusion” about it.
• Furthermore, elaboration on the anti-profiteering provisions,
  • as these are meant to ensure that the benefits of reduction in tax rates are passed on to the consumers
  • and there should be no “unjust enrichment”.
• The Bill will also improve tax compliance and ensure that assessees get input credit of the taxes paid.

In India, a sentence that begins with, ‘In theory…’, it’s reasonably certain that in practice, its opposite will come true.

• In theory, everyone agrees with finance minister Arun Jaitley that we need a clean, transparent taxation system.
  • In practice, most people, even while listening to his speech, are scheming how to avoid paying it.
• The one thing we know as Indians is the difference between theory (what’s on paper) and implementation (what actually happens).
•  The GST will mean a single tax rate across the board for all goods and services
  • and while it may not be singular in the sense
  • that there could be three or four slabs depending on the grade of the good involved,
  • an average of 17-18% would more likely as the one pitched for.
• In addition, the ranges have varied depending on being essentials or sin products.
• In conclusion, the GST is essentially an efficiency enhancing tool that reduces the number of filings
  • that be capable of which simplifies processes and reduces the scope for corruption.
• Hence, we should not expect any revolutionary changes in the way in which the economy functions
  • as we are only tinkering with rates and making life easy for companies.
• So, the concept of a revenue neutral rate means that the government is not giving up any revenue.
  • Thus, for services, we should be prepared to pay more.