Keep GST on track, with no more delays

Now that the Goods and Services Tax Council has come to an agreement over the contentious issues of dual control and the revenue-sharing code between the Centre and states, it’s hoped there will be no further delay in the implementation of GST. There is one issue, over powers given to officials to arrest people in tax evasion cases, that states like West Bengal found too harsh, and it has been watered down. So there was give and take between the Centre and states, with the Centre rather magnanimous. Interestingly, computer programmes, not human beings, will determine who will get to tap which sections in states. The date for the rollout is July 1, and one only hopes it is not delayed further, as the government does have time till September to implement it.

GST will be one of the biggest reforms to be implemented since the economy was liberalised in 1991-92, and it will be an exciting phase in the history of tax collection as it is expected to widen the tax base. It subsumes most other indirect taxes like sales tax and excise, etc. The major advantage, besides widening the tax net, is that GST will eliminate corruption and tax evasion to a large extent. Some experts feel India’s tax-to-GDP ratio, one of the lowest in the world at 16.6 per cent, compared to China’s 19.4 per cent, will go up. This is good news for the government. In fact, certain measures taken by the Narendra Modi government last year will also widen the tax base. The demonetisation of Rs 1,000 and Rs 500 currency notes has also added a significant number of taxable accounts. The Reserve Bank is yet to reveal numbers on the amount of black money that has entered the system, as this was one of the objectives of this highly disruptive measure from which people are till suffering, not to mention the huge numbers of jobs lost and people made unemployed. It is hoped as the cash position improves, the jobs will return.

For now, it’s only the taxman and the government who are benefiting from all this. With a significant increase in tax collection the government will be able to undertake several of its pro-poor and pro-dalit/tribal programmes. It will be in the interest of transparency if the government spells out how much money went where, and for whom. It will also make citizens more willing to pay taxes if they know the beneficiaries. For instance, people silently accepted the immense hardship caused by the “notebandi” as they were told it was to nab holders of illegal wealth. If the government and the RBI fail to reveal the number of such people caught, it will be letting the people down.