The GST Conundrum


The Goods and Services Tax (GST) regime began in India on 1st July 2017 onwards. The GST is an indirect tax throughout India to replace the taxes and levies of the Central and State Governments. The GST is a national sales tax. It replaces 16 current levies ie; 7 central taxes like excise duty and service tax and 9 state taxes like VAT and entertainment tax. The Government of India announced it in the Parliament very dramatically by calling special night session of the house. The Prime Minister and the Finance Minister have taken special efforts to roll out the GST in a haste manner as if the nation is facing serious tax collection problem due to non-existence of GST. It is imperative to remember here the same BJP was opposed the GST Bill when the UPA government has introduced the same. Narendra Modi as the Chief Minister of Gujarat openly criticized and opined that he will oppose the imposition of GST by tooth and nail.

The way the new tax system was introduced amply proves that it is another biggest neo-liberal push in order to satiate the interests of the monopoly producers and wholesalers who controls the market. When 100 days have passed after the implementation of GST, the tall claims of the government have gone to the wind. The prices of all essential commodities are shooting up, the service charges including rail, air, communication and taxi fare have increased, rates for hotel and restaurant foods have increased manifold due to the hasty implementation of GST. Small Scale Industries, small retail shops, petty service providers, self employers etc have been closed their ventures as they were unable to combat the big organized sectors both domestic and foreign. Several labour intensive industries such as textiles, construction, land developing, agro-based industries are on the verge of closure. Thousands of workers, mainly from the unorganized sectors have been laid off. Still many of the traders and small industrialist are unaware about the nitty-gritty of the GST.

The GST will severely affect the existing federal structure and the freedom of the state government to levy, collect and utilize the taxes. After the implementation of GST the states have no power in deciding what tax rates to impose on what commodities and service. These rights of the state government were clearly envisaged in the Constitution. Now if any state has any complaint or suggestion regarding tax rate, collection, disbursement etc, they have to go to the GST Council where the Central Government has substantial voice.

As the GST is purely consumption based and has no relation with production, the consumption state will be the beneficiary and the manufacturing state has to suffer. It will adversely affect the production. In another way the ultimate burden of the tax will be on the consuming people. The new regime was supposed to mean lower taxes; instead it is riddled with the irrationally high rates. The government has to reduce the tariffs of GST rates and the state governments and the traders should be given adequate time to enable them to know the nuances of the new tax system.

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