‘Various provisions in law not clear’
Conceptually, the Goods and Services Tax (GST) is a welcome idea… it will unify India as a single market. However, there are many challenges before it. The law envisions a situation where every transaction is billed and every sale is matched with every purchase. But that’s an ideal situation. There are various provisions in the law which are not clear and clarifications are yet to come. The government has set stringent deadlines for implementation of the law, but most are not ready for it. Awareness about the law has only happened in tier 1 and tier 2 companies, while the vast majority of the other companies are not prepared. The basic infrastructure necessary for implementation of GST is not ready. In a country where power cuts are frequent, it is unrealistic to expect that each and every transaction would be billed and uploaded… I think the teething issues with the law will linger for six months or so, but in the long run it will be beneficial.
‘Some prices may go up and some may go down’
Today, we have a multitude of taxes… credit of one tax against another is often not available. Therefore, the Local Body Tax paid by a shopkeeper, when he brings TVs or refrigerators into his shop in Pune, cannot be used as credit to pay Value Added tax (VAT) when these goods are sold by him to consumers like us. This increases the cost of products. GST will remove this cascading of taxes and eventually, prices will decrease. However, in the short run, some prices may go up and some may go down. For example, your mobile phone bills have 15 per cent service tax today. These will incur 18% GST from July 1… it does not mean that prices would go up by 3%. The mobile companies were not getting credit of the VAT paid on machinery they would have purchased. Under GST, such restrictions won’t be there and that would be a benefit available to them, which they are expected to pass on to customers. As per a special provision, a person can be penalised for not following that, if a complaint is made to the government. Even otherwise, competition in the market will ensure that such benefits are passed on to consumers over a period of one or two years. With the GST is in force, prices of cable services, beauty treatments, cold drinks may go up, while some goods such as toothpaste, processed foods, shampoo etc may go down. Basic necessities like milk, education and healthcare are exempted from GST.
‘GST will certainly boost the GDP’
GST is a long overdue step… through GST, the regional irritants would be removed and it would lead to greater efficiency in production and distribution of goods and services. In the short run, there would probably not be much positive impact on economic growth. However, in the long run, GST will certainly boost the GDP by improving taxation and compliance.The inflationary pressure on the economy is expected to ease as the GST has been fixed at lower rates for most essential items and essential services. This would lead to more affordability for lower income groups. Through the new system of GST, the registration of business units would increase… With the new rule, anyone whose turnover is above Rs 20 lakh has to comply with GST. This will bring smaller companies into the tax net. Single point taxation will increase tax compliance and… increase government revenue. GST has multiple tax slabs instead of a single tax rate, and it would be a cumbersome process. Hopefully, it will be simplified in the long run, when prices will stabilise…