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Don’t ruin GST before it takes off PDF Print E-mail
Tuesday, 11 July 2017 03:54
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Santosh's edit

Maharashtra and Tamil Nadu are trying to vitiate the spirit of GST by levying new taxes

 

The good news is that despite all the apprehensions, GST is off to a relatively smooth start and even J&K has decided to levy the tax. There have been no sharp increases in prices, nor have there been too many complaints of people not able to upload their invoices. Much of this, no doubt, has been due to the government decision to go ahead with GST but not impose any penalties on those not able to comply with all the formalities. While that was eminently sensible, many other pieces have also started coming together now and the government continues with its efforts to educate people on GST and to remove misconceptions that can derail the process. Revenue secretary Hasmukh Adhia has tried to address as many issues as possible in his series of Master Classes and did well, for instance, to point out that people didn’t have to fill three forms every month, but had to fill one form that had three parts—and once you filled in the first, the others got filled up automatically. The government also showed how GST invoices could be generated manually, a GST app was readied and a series of software providers like Tally advertised services for a painless GST. While everyone cheered the abolition of border posts, the GST Council also showed tremendous flexibility in tweaking rates in response to industry representations—given how the ideal GST will have only 2-3 rates, such flexibility is critical in the years ahead.

What is unfortunate, in this context, is the attempt by a few states to try and subvert the GST process by coming up with new taxes. If the best part of GST was the fact of having the same tax rate across the country for any product—so it was one country, one tax—this will vitiate the process. It was bad enough that Tamil Nadu decided to impose a 30% entertainment tax over the 28% GST, Maharashtra has increased the one-time registration tax on private two-and four-wheelers by 2%. Ostensibly, this has been done to compensate for the losses due to levies like Octroi that were subsumed under the GST. This is unacceptable since it was always known that such duties would go once GST came in, but the compensation by the Centre was supposed to make up for it and, in any case, the tax buoyancy under GST would give the states more revenues. To the extent local bodies have to be compensated for losses, the states have to do this from their budgets. The GST Council has to discuss this issue and ensure that states don’t start levying their own taxes even though the law allows this—if two states are allowed to get away, it is just a matter of time before others follow; Haryana and Punjab, for instance, would love to get back the mandi taxes under a new garb. Ironically, while some states try to unravel GST, a J&K is currently working on bringing in real estate under GST—this is a big lacunae that makes it easier for cash transactions to flourish in the sector—and finance minister Haseeb Drabu is confident it can be accomplished by the next budget. Cooperative federalism is at stake and it is only appropriate that the body representing it, the GST Council, gets more pro-active in defending it.

 

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