Improvements in GST feasible as we move along, says Partho Shome
Fiscal policy expert Parthasarathi Shome says the success of the goods and services tax GST) hinges on the preparedness of businesses to comply with the new levy. He reckons that the Centre and states would be forced to make improvements in the GST design if taxpayers have discomfort in complying with the new regime. “I do not want to be unduly critical of GST. The Centre and states have done well to forge a consensus on the enabling laws after intense negotiations. Some give and take in inevitable. Hopefully, improvements will take place if tax payers are discomforted”, said Shome, former advisor to the finance minister in the UPA regime at a panel discussion followed by the launch of his book “Taxation and Development”. GST is meant to create a seamless common market, and the Centre is hopeful of rolling out the new levy on July1, this year. The optimism follows the GST Council’s nod to all enabling laws -- the draft Central GST, Integrated GST, State GST and the Union Territory GST Laws. Besides the Centre, state legislatures have to pass the law, after which all rules of all laws have to be finalised and published. India's plan is to have a dual GST with four-rate structure ranging from 5 per cent to 28 per cent. But the levy excludes real estate, electricity, alcohol, besides petroleum products (that will be brought under the net subsequently). An extra cess will be levied on luxury and non merit goods. Shome is, however, clear that the current version of GST is not internationally benchmarked. “It seems as complex as the value added tax regime that was introduced in Brazil in the 1990s, he said, adding that improvements can be made overtime. GST will be administered both by the central and state tax authorities. So, Shome underscores the need for proper training of the tax administration to ensure ease of doing business. Ahead of the value added tax regime (that replaced archaic sales tax imposed by states), the Empowered Committee of Finance ministers held several rounds of discussions with various stakeholders that included industry and trade, he said. Are both the taxpayers and the tax administration prepared to implement the new levy and is the IT system up and running? These are the crucial questions to be asked now. A robust implementation strategy is also important to ensure the success of the tax reform, he said.