Dear FM,
Sub: GST Implementation – Is it time for next wave of GST reforms?
The positives
- GST being enacted as a consensus effort of Sates and Centre is an outstanding achievement in this heterogenous country of ours.
- The fact that some significant part of the parallel economy in some sectors have been cajoled into the mainstream in spite of decades of protection and habit is certainly a big achievement. The number of tax payers in the system has increased by at least 30+ % which is quite encouraging.
- The rampant corruption of some tax officers in the State and centre in that order was reined in due to GST.
- The litmus test of gross collections as per what has been declared seems to indicate a much better collection even though a major portion of the parallel economy still to start contributing to the Country in which they thrive.
- Industry especially the tax compliant segment has started enjoying the fruits of their honesty with less discretionary interference and reduction in their “transaction cost”.
- The competitive edge to the exporters due to reduced cost of gods and services exported may have been partly offset by the rise in petroleum products import costs as well as the delayed refunds. However, the weakening of the rupee has helped.
- The role of the tax intermediary who could have been the catalyst in tax evasion has been considerably reduced and knowledge based advice is making headway.
- The GST Council has proactively modified the law as suggested by industry and professional institutes to some extent. Maybe need to meet linger and clear out the outstanding issues.
- Many others…
The negatives - flip side
- The drafting of the law being with the revenue who is also in charge of collections is a major anomaly in the system. There is no check and balance. Suggestions made are again subject to passing the revenue filter. Drafting groups should be by representatives of industry ( unsung Champions of India) who pays for all and the known and honest professionals.
- The basic premise of making a law for the tax compliant and law-abiding seems to be elusive. The GST law is still being drafted for the errant taxpayer. There is no accountability on the excesses of the administrators. This trend needs to be reversed this year in the next wave of GST reforms.
- There are more than 50 valid suggestions made to make the GST law simple, fair and transparent without any risk of revenue leakage which is awaiting enactment and implementation.
- Concentration on the non-tax compliant using the immense data mining capability of the IT infrastructure would also ensure the evader is convinced that it is not worth it.
- The rationalization of rates for products and services to be taken up again to remove the present difficulties.
- The inclusion of petroleum, electricity and stamp duty in GST needs to be completed this year which would remove the impact of cascading to some more extent and make goods and services from India competitive. It would make the collections in non-tax compliant states much higher.
- The artificial restrictions in input credits in transition as well as on motor vehicles, works contract, expenses on employees are being overcome by large taxpayers legally and it is not in line with the pristine GST.
- More...
The GST inspite of all the resistance from the parallel economy, intermediaries, errant officers has been a muted success in my personal understanding. It would be a resounding success and pull up the economy further is the next level of tax reforms are taken up to attract FDI, collect more just taxes and take India to the higher place in the world it deserves. Jai Hind.
The author can also be reached at madhukar@hiregange.com
CAclubindia
