And now GST Trauma

With remarkable consensus, the GST Council, comprising Finance Ministers from all the States, has agreed on a complex four-tier rate structure for all Goods and Services in the Indian economy. The timeline has been drawn out for last two steps ahead -– tying up the loose ends on June 3 and the climatic introduction of the new GST regime on July 1.

 That nobody is against GST does not mean that everybody is confident about its successful implementation. In truth there is a lurking fear that the July 1 deadline is too tight and that such a drastic game-changing tax reform would inevitably lead to massive disruption, chaos and suffering on a massive, country-wide scale.

That, too, within eight months of demonetisation – an irrational and cruel exercise which failed to achieve even one of its stated objectives. Neither has black money been flushed out nor has terrorism been stamped out. Neither has the scourge of counterfeit currency been wiped out nor have the coercive efforts to impose a cashless economy worked on the ground. All that note bandi has succeeded in doing is to impoverish millions and enrich a select few.

As far as GST is concerned, even the most vocal advocates admit that the implementation process is bound to be painful and traumatic.  The euphemism being used is ‘teething troubles”. No, troubles will prolong and nobody knows how long.

 India is just a month away from a complete overhaul of its indirect tax system – and this is being done

with the full consent and active participation of every political party across the ideological spectrum. By all accounts, it was smooth sailing even in the case of fixing rates for Services, which could potentially have led to bickering and delay. But barring a few still unresolved contentious items, particularly gold and bullion, GST rates for virtually every conceivable economic activity have been finalised. There will be four tax slabs – 5%, 12%, 18% and 28% apart from certain categories which will be exempt from tax.

If anything the coming months after July 1 are bound to plunge the country into another spell of anxiety, anguish, adjustment to adversity and acrimony. Trade and commerce, big and small, will undergo a period of near-pandemonium marked by desperate claims and counter-claims from each and every sector of the economy, regarding which of the four tax rates applies to a particular Product or a specific Service.

It is widely acknowledged that the coming six months will open the floodgates of litigation. The black humour already doing the rounds is that it will prove to be a golden era for Accountants  and Tax Lawyers and the dawn of the much-promised Achche Din (better days) for e-commerce consultants and service providers.

In contrast, small scale enterprises and professionals, especially in the informal sector, appear destined and doomed to experience dire calamities as they struggle to cope up with, comprehend and adjust to the complex new GST concepts like input tax credits, tax slabs and exemption categories, novel definitions of services, and the mandatory filing of returns and transaction details.          

Broadly, there are certain clearly identified areas of concern. It is now more than certain   that between 1 July and the time when GST eventually becomes the accepted norm, everyday life will be disrupted, not just for businesses but also for end-users and ordinary consumers, and therefore the wider economy.

In a country which has barely recovered from the totally unwarranted and futile demonetisation shock, the GST trauma could be even more back-breaking.

Strangely enough, even left parites with all shades of ‘Marxism’ and communism don’t utter a word or two about GST disaster as if they have nothing to do in market economy. After all they are market ‘socialists : Today there is no difference between right and left. They are all market babies and they always dance to the tune of market operators.  31.05.2017.                         

[contributed]

Frontier
Vol. 49, No.49, Jun 11 - 17, 2017