One market, one rate — much like the European common market — was how the Goods and Services Tax was envisaged. Considered the most radical tax reform since 1991-92, when the era of economic liberalisation set in, it involves a revolutionary change and promises transparency and less corruption. It was an ambitious and near-impossible dream, given India’s huge size and multi-layered society. So the fact that there are four tax slabs instead of one common rate has created scepticism in some circles on the promise of one rate, one market. The gap, for instance, between the rich and the poor is so enormous in India that, ironically, it would be iniquitous and undemocratic to have one rate. There is also a need for clarification on where the tax will be imposed.
If it is to be on the supplier, then if there are multiple sources of supply, will they be taxed at all sources? It may be noted that Union finance minister Arun Jaitley has pledged that there won’t be any need for multiple registrations. He has also assuaged fears over the arrest powers given to GST inspection officials. The fears of corruption and arm-twisting are not entirely unwarranted, as taxpayers have been terrorised earlier by sales tax and other authorities. Neither the government nor the GST Council can be blamed for how the ultimate GST, with different tax slabs, turned out. Given this backdrop, it is puzzling why it was decided to bring bidi, the poor man’s smoke, under GST for health reasons. If this was the reasoning, why was pharmaceuticals included in the demerit list? It involves people’s health and is in the interests of affordable healthcare, which is high on this government’s agenda. There appear to be a few contradictions here, and since Prime Minister Narendra Modi will have the final word on contentious issues, one hopes he will look into all valid grievances. Mr Jaitley had reportedly sought industry feedback, but obviously seems to have overlooked these, or didn’t think them worth discussing.
Perhaps Mr Jaitley didn’t want GST’s rollout, which has taken 16 long years to materialise, to be delayed further. Even former Prime Minister Manmohan Singh withdrew his amendment on the Rajya Sabha being denied a chance to discuss the GST in the interest of getting it off the ground. The rollout day has been set as July 1, 2017, instead of September as earlier thought. Bringing the GST into operation will be challenging as there is a lot of nitty-gritty yet to be resolved. As they say, the devil lies in the detail. Apart from the four market rates, for instance, which has attracted considerable criticism, one calculation shows the tax rate can go up to 55 per cent in certain cases. This needs clarification.