GST: A win-win situation for all

The latest ammunition at the disposal of the opposition appears to revolve around Goods and Services Tax (GST) over which they are up and against the Union government. Their demand that the government refer the GST Bill to a Parliamentary Standing Committee is only a tip of the iceberg. Ironically, the GST Empowered Committee Chairman and Kerala Finance Minister, K M Mani, while pointing out that a single tax regime will boost the country’s economy also seeks consensus among the States on the issue.

The government has ample time to convince and win over the States opposed to the issue, as the revised GST norms are proposed to be launched on April 1 next year. It is not a strange bargain as Mani estimates that the benefits will be to the tune of Rs 1 lakh crore. The beneficiaries will be all stakeholders including trade, industry and labour. Besides, it will benefit the States to a larger extent than the present Value Added Tax (VAT) system.

However, the issue requires ironing out corresponding subjects between the Centre and the States viz., tax structure on inter-state services like transportation, communications, tax on essential commodities and the methodology of tax collection. The Bill has been tabled in the Lok Sabha and is slated to come up for discussion after May 5 along with other contentious Bills like Land Acquisition Bill. It needs a Constitutional amendment, requiring two-thirds majority in both the Houses.

Let us take a cursory look at how the GST regime benefits all. Primary benefit will go to consumers. They will have to pay one-time tax and uniformity is maintained across the States. It means, all the central and the state taxes (assumed to be about 16) will be clubbed together and then charged to the customer. The idea looks bright. The measure will transform India as one market because CST and entry tax will cease to be levied separately. Thus it benefits even the trader, who exports the goods to various states, for the simple reason he will pay the same tax irrespective of whether he is selling his wares at home or in other States.

At present, small and medium scale traders are not willing to export as they are worried about various sales and entry taxes thus denying consumers from other states a fair share of quality goods. Cumbersome process in the name of CST and other state taxes, besides entry tax and octroi, put them off. The proposed change will enable quality products to enter the markets in all States, thereby giving scope for tremendous value for money to the consumer with only transport cost getting added to the pricing. As a jubilant chilli trader puts it quite appropriately, “We can sell the product even in a remote district in the country sans any tax restrictions.”

Also it would benefit the manufacturers in terms of preparing invoices. At present, the producers have to fill up information depending on the transaction and particulars of importing state. But after GST regime starts, tax calculation will be easy and will not need any additional information. Further, if there is any exemption, it will be common to all the States, which is not the case today. In the present case, the final price of the product will be determined by the number of exemptions, thus it will differ from state to state. But under GST, the rate of duty will be uniform across the nation and therefore the price, although the end price may be determined by the prevailing transport costs.

The transporters get benefited under the GST regime, because there is no entry tax and their trucks will not be stopped at each and every entry point. Moreover, the distance can be covered quickly and perishable commodies can be moved fast. This apart, the new GST regime will resolve various disputes between the trader and tax agencies such as controversies of classification and product identification. However, the GST must be a single tax and cover full-length goods and services and without too many exemptions.

By KVVV Charya