Pune: The Goods and Services Tax (GST) is a momentous change in the federal system of India. Though it is not perfect yet, it is a positive intermediary step which can increase the GDP by 0.9 to 1.7 per cent. It will make life easier for the common man, said Dr V Bhaskar, former Special Chief Secretary, Finance, Government of Andhra Pradesh.
He was delivering the lecture ‘GST revolution: challenges and opportunities’ organised by Pune International Centre (PIC) on Wednesday at Mahratta Chamber of Commerce Industries and Agriculture (MCCIA). Eminent economist Dr Vijay Kelkar, Vice-President, PIC and Dr Anant Sardeshmukh, Director General, MCCIA, were present on the occasion. The session was chaired by Pramod Chaudhari, Trustee, PIC and President, MCCIA.
Bhaskar demonstrated the benefits of GST with practical examples. After showing receipts of restaurants and flats and breaking down the taxes, he said, “The nature of our current tax system is complicated. With several taxes like VAT, service tax and VAT on service tax, there is cascading effect - which means taxes on taxes. GST removes this and makes our bills simpler with just two taxes - the Central GST (CGST) and State GST (SGST).”
Dr Bhaskar underlined the need of a uniform tax system quoting projections from a recent NITI Aayog report. “The Aayog says that with the current 7 per cent rate of growth, we will still have 5 per cent population Below Poverty Line (BPL) by 2032. They project that a growth rate of 10 per cent will be required for 0 per cent BPL population by 2032.” He also stated that factors essential to catalyse such growth are simpler taxes, promoting investment, enhancing competitiveness and harmonising national market which will all be facilitated by GST.
The speaker also highlighted the limitations of GST. “The first problem is the limited base. Goods like petroleum products and alcohol are not under GST. This constitutes 40 per cent to 50 per cent of the State’s income. This means half the base is not under the system. The distinction between traders, manufacturers and other entities also remains contentious,” he said. He noted that the number of rates in the GST system will be around 22, while in the existing regime it is 46. “This seems to a substantial reduction, but the question is - is 22 a good number?” he asked.
Some further flaws pointed out by Dr Bhaskar were excessive, lengthy forms leading to compliance burden; complicated place of supply rules; too many advanced ruling authorities and ambiguous cross empowerment. “This challenges the notion of One Nation, One Tax,” he said.
In the concluding section, Dr Bhaskar remarked that GST should be looked at positively. “Mechanisms like GST Network (GSTN) link Aadhaar Card with PAN number. This makes tax evasion difficult and also forces tax department to improve efficiency,” he said.
The idea of GST was conceived by a committee under Dr Kelkar in 2003. Speaking on the issue, Kelkar said, “This is just the beginning of the process. GST is intended to be a unique, simple tax system. In the next 10 years, we will move closer to this target.”
In his concluding remarks, Chaudhari said, “The immediate period after implementing GST might be painful. But it is critical to accelerating the growth of the nation.”