What is GST ? It means Goods and Service tax.
GST it is popularly believed that it is a “Single rate” taxation with a myth that “One India” “One Rate”. Most of the people start appreciating the move without understanding the real intention of the State and Central legislators.
GST is nothing but an amalgamation of most of the indirect taxes into one, popularly known as “avial” or “Mixed fruit jam”. In this process each vegetable / fruit losses its own aroma.
Almost all the rules and regulations of the State VAT Acts, Service tax, Excise duty etc., are clubbed into one and made the people to believe that it for the “ease of doing business” in India.
Because the States do not want to lose their own identity and do not want to share the common tax revenue on an equitable basis, they want to have separate legislations under the GST. In the essence instead of complying with only Central excise, State Vat many business men have to face umpteen numbers of legislations. Hither to business man bothered about only CST, State VAT and Central Excise, now he has to know much legislation wherever he thinks of selling and going for registrations for a single transaction as it is a destination based tax. The transaction may be over but he will be put into the difficulty of going on filing the Returns.
Another important point is “Input Credit”. Any exemption in any legislation of India does not come without so many riders. If people want to use the tax credit, they will end up with litigations which will never end, and will go from tribunal to different level of courts endlessly. Most of Service providers will not get the Input credit advantage and the cost of Service will go-up. In States, where there is no scope for in-put credit adjustment, the refunds will take years to materialise. In-put credit can be availed only when the other man uploads the data. Confusion will prevail and one will wait for another to get input credit.
Yet another important point is the Authority given to the Bureaucrats “the power to make rules”. The main Act will be only 50 pages but the rules will be of more than 500 pages. Indirect taxes are more of rules and forms based laws. Moreover today’s rule will not be the rule for to-morrow. State after State and Central Government throughout their time will be busy in making the rules without understanding the plight of the trade and commerce in adhering to the rules.
“Cess” - in one kind of cess, input credit is available and another type it is not available. Government will not allocate the total tax revenue based on the tariff after collection. It has to be done by the assessee by dividing the 0.5% rate into rupee and paisa and to track it by opening different ledger heads. The cost of compliance and the difficulty for the common business man to understand the law, is not the concern of States and Centre. They are interested only in upholding their Right and might.
It is a trend after independence to follow most of the western concepts, that cannot be aligned with Indian conditions, whether it is education, living style, taxation etc., and to follow blindly the concepts which will not work out in India ignoring the basic diversity of our nation. There is a saying that “One man’s food is another man’s poison”. What works in one country do not work in another country, because there may be similarities but they are not identical.
It is also believed by many that GST will end the black-money creation. It is a myth. If the seller do not raise the Invoice and the Purchaser accepts it,in any type of transaction, the circulation of black money never ceases.More compliances will lead to confusion and evasion.
There are many returns are envisaged in the Act about “Out flow”, “Inflow”, monthly, annual etc., will lead to extra ordinary cost of compliance and only a small population can afford it. For One State, the number of Returns in a year will be 37. ( Outflow 1 + Inflow 1 + 1 monthly return) 3 x 12 months + 1 yearly Return = 37. If there are 10 or 12 states, the number of returns to be filed will be enormous. (10x37=370, 12x37=444)
There are many more things to write, but I would like to point out only a few.
To sum up, the intention is not to criticise the new initiative but the intended legislation is good only if
1. The States and Centre come forward to collect the tax at a single point, with a single affordable rate on different goods and services.
2. Input credit must be reduced to only in cases, where further manufacturing / processing is envisaged for a new commercial product that is a real value is added. Reselling with input credit will not stop cost escalation as there are many middlemen involved in channels of distribution. As said earlier, the in-put credit is available in paper and not in reality as they have to wait for the other. And also in some cases it cannot be availed at all.
3. GST Council should come forward to find a just and equitable formula to divide the total Tax collection based on “One India, One Rate & Single point taxation” among the States and Centre.
4. The States can dismantle their offices and utilise the men and resources for alternative use.
GST in my opinion in the present form will not reduce the cascading effect of prices and with the rules and regulations will lead to lot of compliance problems. More time and in-depth analysis on the impact is needed if it is to be implemented in the present form. The last and the most important aspect is that Legislations must adhere to the cannons of taxation.