The rise of independent India inherited wide ranging socio economic issues from colonial prowess Britain for eternity. The hunting of raw materials and markets for imperialism served the capitalism of Britain at huge burden of indigenous economic health. Colonialists framed the economic laws as such to take every beneficial thing from banks of Ganga and to squeeze it on banks of Thames. They were foreigners not only in perception but they blew away the cobwebs time and again by proving it in deeds as well.
Thus the palatability of independence was siphoned away by severe misery all around. The country embarked the socio economic journey on track of Socialism. The industrialisation was envisioned to improvise the fortunes of nation. These and other economic policy like taxation embodies much broad vision than material utility. They were aimed at elimination of poverty through redistribution of wealth and improvement in health of economy. With changing times and climatic situation, the reforms have seen light of day to suit the conditions as was manifested in planning and different industrial policies.
On revenue side the government shares a modest income from taxation (compulsory levy payable to government by an economic unit). Either direct (like income tax etc) or indirect (like GST etc) tax the policy on this front serves multi dimensional role by helping government to improvise on fiscal planning. In fact the taxation policy was reformed time and again to streamline its functionality. However this train slated to evolution of consolidated GST reached destination after more than decade of time to bring it at par with outside economies. This step pave way to sobriquet of One Nation with One Tax and One Market.
Goods and services tax commonly shortened to GST(based on modified VAT principle or VAT+ tax on services thus siphoning away cascading effect of tax) is an indirect tax on good as well services which was recently implemented throughout the country. The historical records Travers the sticky path of its evolution. It was first recommended by Vijay Kelkar in 2oo3. Then onwards the ups and downs were eroded in subsequent efforts to finally claim it to be implemented along length and breadth of country.
GST is much more than the perceptive indirect tax with multi dimensional effects on economic health of country. It ventures other arenas and helps to streamline other features like investment to consolidate the overall gains in economy. If analysed from economic angle the method of taxation is aimed to improvise of multiple fronts. It’s slated to lonely contribute 1.5 percentage point to GDP if WORLD BANK statistics is taken into account. The innovative indirect tax will do away with at least 500 taxes along the length at breadth of country. This piling reduction means streamline the business environment to enhance scope for free trade and commerce. On 2nd front the single tax will uniform the market health along the dimensions of country and thus help in solving the complexity of One Nation With 29+7 markets with single rate all over country.
This shall improve the business environment of poor states by doing away with tax rebates and concessions to tycoons by rich states. It will also improve the feeling of unity by alignment of markets to feel free across states. Thirdly the GST is serving the plates of consumers in sympathetic manner. Its unique quality of destination based tax and input tax credit redistributes the gain towards consumer states. What a plan of implementation of article 39 clause b and c by reducing inequality gap? What a coincidence occurred when BIHAR and Assam rejoiced to ratify the bill while TN and Maharastra lamenting on loss of revenue! The cluase of input tax credit will transfer the maximum share of manufacturing states to consumer states of country.
Fourthly the streamlining of various taxes improves Ease of Doing Business across country. The business community’s long lasting demand of complex and dynamic structure of bundle of taxes overhaul was very well blown away in single slap by GST. Furthermore the GSTN and simple procedure of return filing has left cumbersome bureaucratic procedures in lurch. This reform improved the confidence of investment companies all over world and helped to improvise of this front by touching the figure not seen during previous decade(crisis period).
In fact the implementation of GST brought our taxation policy at par with other countries notably West European and Canada.Fifthly the reform adhered to principle of what I call FISCAL FEDERALISM by establishment GST COUNCIL to rationalise the tax rates and deliberate on other issues emanating from its implementation. This framework paved way to quid pro quo clause for manufacturing hub states of TN etc for initial 10 years.
Among others the minimum rate of tax on primary articles of common usage looks most fascinating and worthwhile by keeping purchasing power of teeming millions in consideration. The spirit of DPSP provision of redistributing wealth by heavy taxation on luxury items on other side aligns with aspirations of democratic credentials.
The dual purpose of socialism(welfare provision) and capitalism(ease of business) could be read through GST Taxation reform of country. But as is said “sun shines only during day the night supercedes its prowess in blink of eye”. The policy isn’t without its negatives with clear contrast on some fronts with ADAM SMITHS golden rules.
Adam Smith the father of economics talks about success of taxation on conditions of Equality ,Certainty,Convenience and Economy on upper side. When analysed through prism of above conditions the GST format implemented in our country seems in contradiction at certain parameters. Ist of all the Equality notion is buried through bias across commodities of same quality.
An indirect tax with cumbersome 4 rates evolves so complex a procedure as hell banging game for commodities. The world experience of single rate as was envisioned in original proposal of UPA regime could have brought a much simpler format. On 2nd front the certainty of taxes seems illusory with conflicting claims after implementation in GST Council which later slashed rate on various items.
The reform bracket kept some vital items out of taxation thus leading to uncertainty in its functioning. The reform dies amplify ease of doing business by streamlining taxes but the convenience of perverted form was doomed in infancy by failing on input tax credit payment and complex rate structure.
Economic climate does saw its whip emerging but the irrational format of new and innovative GST of our country without due deliberation is too sketchy to pay if not reformed again. The wholesome purposes of GST was to do away with complexity and dynamic nature of indirect taxation but the step was taken in hasty manner.
Finance ministry took steps on war footing with back to back meetings and deadlines without widespread discussion which ultimately proved insufficient to evolve as GOOD AND SIMPLE TAX. It would have been better if the implementation date have been moved ahead to involve think tanks across the table for much simpler format than the present day GST. As is said “slow and steady wins the race”.
Conclusion of reform of the decades as is hailed the debate ends on promising note of “Better late than never”. The step would have been taken long while ago but the farsighted policy aimed at economic development took a decade to see the light of day. Alas the decade’s time proved insufficient to evolve the expected format. It reminds one the saying that “Good Economics Implies Bad Politics and Bad Economics Implies Good Politics”.
Initially the reform was thoroughly deliberated on committee stages but the later years could only manage the ministerial offices. All the benefits of GST is not possible to accrue in quick succession but in gradual process. The Reform isn’t a event but the process like 1991 overhaul which is going to see thick and thin times in years to come to evolve as GOOD AND SIMPLE TAX for economy.
The strategic thinking stops at advisory of taxation to be successful by reducing SMITH’S conditions to Simplification to pay and Single but Modest rate of taxation to serve the dual needs of economy. Whenever previous structure is demolished the issues are bound to rise which need resolution through farsighted and egalitarian approach.
Writer Shahid Majeed Mir hails from Misribehak Machil Kupwara and can be reached at firstname.lastname@example.org*