BRP Bhaskar
Gulf Today
When a new tax regime introduced after three decades of debate calls for review and revision within four months, it is evident that the authorities did not act with due diligence. That is what happened with the Goods and Services Tax.
A major overhaul of tax on goods was proposed first by former Prime Minister VP Singh in 1986 while serving as Finance Minister in Rajiv Gandhi’s government. Liberalisation and globalisation were not under consideration at that time.
Globalisation put service tax also on the agenda. In 2000, Atal Behari Vajpayee, the first Prime Minister belonging to the Bharatiya Janata Party, proposed a goods and services tax regime and set up a committee to design an appropriate GST model for the country.
The committee was headed by Asim Dasgupta, a US-trained economist who was Finance Minister in West Bengal’s Communist Party of India (Marxist)-led government. Before he quit in 2011, following his - and his party’s - defeat in the State Assembly elections, the committee is said to have completed 80 per cent of the work.
Introduction of GST was one of the programmes taken up by the Manmohan Singh government during 2004-2011 as part of the reforms package, and it attempted to enact legislation for the purpose. It could not make much progress because of the stiff opposition from various political parties, including the BJP.
One of the vagaries of India’s democratic system is the propensity of political parties to shift their position on programmes, depending upon whether they are on the treasury benches or on the opposite side. After the change of government at the Centre in 2014, the BJP started pushing the GST project.
The Congress did not turn against it but it raised issues about the structure proposed by the GST committee, leading to further delays. It wanted an 18 per cent cap on GST but this was not acceptable to the government.
Unlike Manmohan Singh, who often shelved reforms, especially when critics pointed out they might hurt the poor, Modi was willing to ram them down. He pushed through the required enactments, including a Constitutional amendment, and ushered in the GST regime on July 1.
While most countries have uniform GST, taking into account the size of the country and the complex ground situation, a three-tier system, comprising a Central GST, a State GST and an Integrated GST, income from which was shared by the Centre and the State, was brought in.
Soon there was an avalanche of complaints from all over, especially about the tax on services, which was new to the country. The high rates of tax which added to the cost of living also came under attack.
Complaints poured in not only from consumers but also from business houses who found the system of filing returns too cumbersome. Evidently the official machinery had not paid adequate attention to the details.
Last week the GST Council, comprising Finance Ministers of several states, reviewed the tax structure and decided to revise the tax rates drastically. It also agreed to simplify the filing procedures.
Under the original scheme, as many as 228 goods and services attracted the highest rate of 28 per cent. The Council brought down the rate on most of them to 18 per cent, leaving only 50, mostly luxury items, beverages and tobacco products, in the highest slab. The rate on many items which attracted 18 per cent was lowered to 12 per cent.
The biggest relief for consumers was slashing of the tax on bills of restaurants other than those in five-star hotels from 28 per cent to just five per cent. The tax on five-star restaurant bills was also reduced, but to 18 per cent only.
For the governments at the Centre and in the states, the GST is a major source of revenue. They stand to lose an estimated Rs 200 billion a year as a result of the rate revision.
Congress Vice-President Rahul Gandhi said it was his party’s campaign that led to the rate cuts. Former Finance Minister P Chidambaram claimed the upcoming Assembly elections in Gujarat, Modi’s home state, had forced the Centre to give in.
Assam Finance Minister Himanta Biswa Sarma, who heads the GST Council, dismissed Chidamabaram’s claim as childish. He said the 28 per cent slab would be phased out.
In the prevailing political climate, it is idle to hope that politicians will stop making GST a partisan issue. --Gulf Today, Sharjah, November 14, 2017.
Gulf Today
When a new tax regime introduced after three decades of debate calls for review and revision within four months, it is evident that the authorities did not act with due diligence. That is what happened with the Goods and Services Tax.
A major overhaul of tax on goods was proposed first by former Prime Minister VP Singh in 1986 while serving as Finance Minister in Rajiv Gandhi’s government. Liberalisation and globalisation were not under consideration at that time.
Globalisation put service tax also on the agenda. In 2000, Atal Behari Vajpayee, the first Prime Minister belonging to the Bharatiya Janata Party, proposed a goods and services tax regime and set up a committee to design an appropriate GST model for the country.
The committee was headed by Asim Dasgupta, a US-trained economist who was Finance Minister in West Bengal’s Communist Party of India (Marxist)-led government. Before he quit in 2011, following his - and his party’s - defeat in the State Assembly elections, the committee is said to have completed 80 per cent of the work.
Introduction of GST was one of the programmes taken up by the Manmohan Singh government during 2004-2011 as part of the reforms package, and it attempted to enact legislation for the purpose. It could not make much progress because of the stiff opposition from various political parties, including the BJP.
One of the vagaries of India’s democratic system is the propensity of political parties to shift their position on programmes, depending upon whether they are on the treasury benches or on the opposite side. After the change of government at the Centre in 2014, the BJP started pushing the GST project.
The Congress did not turn against it but it raised issues about the structure proposed by the GST committee, leading to further delays. It wanted an 18 per cent cap on GST but this was not acceptable to the government.
Unlike Manmohan Singh, who often shelved reforms, especially when critics pointed out they might hurt the poor, Modi was willing to ram them down. He pushed through the required enactments, including a Constitutional amendment, and ushered in the GST regime on July 1.
While most countries have uniform GST, taking into account the size of the country and the complex ground situation, a three-tier system, comprising a Central GST, a State GST and an Integrated GST, income from which was shared by the Centre and the State, was brought in.
Soon there was an avalanche of complaints from all over, especially about the tax on services, which was new to the country. The high rates of tax which added to the cost of living also came under attack.
Complaints poured in not only from consumers but also from business houses who found the system of filing returns too cumbersome. Evidently the official machinery had not paid adequate attention to the details.
Last week the GST Council, comprising Finance Ministers of several states, reviewed the tax structure and decided to revise the tax rates drastically. It also agreed to simplify the filing procedures.
Under the original scheme, as many as 228 goods and services attracted the highest rate of 28 per cent. The Council brought down the rate on most of them to 18 per cent, leaving only 50, mostly luxury items, beverages and tobacco products, in the highest slab. The rate on many items which attracted 18 per cent was lowered to 12 per cent.
The biggest relief for consumers was slashing of the tax on bills of restaurants other than those in five-star hotels from 28 per cent to just five per cent. The tax on five-star restaurant bills was also reduced, but to 18 per cent only.
For the governments at the Centre and in the states, the GST is a major source of revenue. They stand to lose an estimated Rs 200 billion a year as a result of the rate revision.
Congress Vice-President Rahul Gandhi said it was his party’s campaign that led to the rate cuts. Former Finance Minister P Chidambaram claimed the upcoming Assembly elections in Gujarat, Modi’s home state, had forced the Centre to give in.
Assam Finance Minister Himanta Biswa Sarma, who heads the GST Council, dismissed Chidamabaram’s claim as childish. He said the 28 per cent slab would be phased out.
In the prevailing political climate, it is idle to hope that politicians will stop making GST a partisan issue. --Gulf Today, Sharjah, November 14, 2017.
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