By Riyaz Sayyed
In true sense GST in India is not one tax instead it’s a multiple taxes. It has 5 slabs of taxation rate. So it is one of the factors which make it unique.
On 1st July 2017 at 12.00 am President and Prime minister of India launched nationwide single indirect tax system GST in the central hall of parliament. Majority of the cricket loving Indians chose to watch launch of GST instead of cricket match between India and West Indies. Just days before implementation of GST, market was flooded with crowd in the assumption that it will be costly to buy luxurious goods after GST will come into effect. Social media networks were flooded with meme of GST. Why so? Because GST will have impact on the life of every Indian.
GST council consisting of Union Finance Minister, Minister of State of Finance and all the Finance Ministers of state and union territories met 18 times to decide all the rate structure and modalities for the implementation of GST.
Why GST in India is considered as a unique in the world despite having same principle of “One Nation, One Tax”?
1) In true sense GST in India is not one tax instead it’s a multiple taxes. It has 5 slabs of taxation rate. So it is one of the factors which make it unique. No country in the world has 5 tax slabs for GST.
2) It has 4 different taxes which makes it unique. In countries like Brazil and Canada, there are two types of taxes but in India we have 4 different types of taxes viz. CGST, SGST, UGST and IGST.
3) Invoice matching concept:- In this system when one businessman claim input tax credit for earlier paid taxes, there will be inbuilt checking system to verify the claim. This is unique in India due to its non-compliant society. As this step compel businesses to pay their due share of taxes or lose the market share.
4) The GST framework in India is said to be based on the Canadian model, but at the same time is significantly different. Indian GST is not perfect as all taxes are not being unified. Major items like liquor, ATF, diesel, petrol, real estate and electricity have been kept outside GST currently, which shall result in cascading of corresponding taxes.
5) GST is a Indirect tax which is regressive in nature. Which means it hurts poor most. Government of India has kept GST standard rate at 18%, so it will hurts poor more and will be inflationary in nature.
6) Indian GST will have a unique Integrated GST mechanism to monitor inter-state trade of goods and services. It will ensure that GST is truly a destination-based consumption tax, and there is seamless flow of input tax credit, even when goods are moving from one state to another.
7) The newly created constitutional body, the GST Council, has emerged as a new model of cooperative federalism, wherein the centre and the states are willing to pool their sovereignty and give fiscal space to each other. The council has taken fiscal and tax-related decisions through consensus and is seen as an example to be followed in other spheres of cooperation between the centre and the states.
8) There is going to be a paradigm shift in the way that business is done in India. An estimated 8 million indirect taxpayers all over India will be having only a digital interface through a single portal for registration, filing returns and for making tax payments. Gradually but surely, businesses will have to shift towards digitization of their book keeping and other operations.
Problems after GST implementation:-
1) Major source of revenue from taxation for States are under GST and hence state will depends on the mercy of Union Government for loss of revenue.
2) Taxes like local body tax, Octroi, Entertainment tax of local bodies are under GST and hence already financially constraint local bodies in the India depend on the devolution from states.
3) Too many tax slabs make it a complex tax structure and at the same time lucrative revenue generating products like petrol, diesel, real estate etc are outside the purview of GST. So people will not get any benefit of lower taxation in this category of products.
4) Five different type of cess will be levied after GST. This is against the principle of GST.
5) Differential taxes for different category give room for evading taxes. For example shoes having value below 500 will attract 5% GST while above it will attract 18% of GST.
6) Many items which are essential like sanitary napkins, apparels, disabled friendly instruments are taxed under GST which should have been exempted.
GST became very popular tax reform in India as it will touch the lives of every Indian. Due to 1.3 billion people and $ 2.3 trillion economy, federal structure, 300 million poor and different societal needs the GST looks like more complex as of now, but with the principle of co-operative federalism government did necessary changes in standard GST to arrive at the model which is suitable for India. But this model is neither best nor worst. We want best GST as it will impact every Indian citizen, so we hope with time government will do necessary changes to make it best.