By Rasananda Panda and Sonam Mathur
Stage is all set to roll out GST (Goods and Services Tax) from 1st July, 2017 onwards across the country. Symbolisms such as mid-night Parliament sessions akin to “tryst with destiny” speeches are planned. Media blitzkriegs since last few days giving the required details about various rates, FAQs and other related details about GST are everywhere. Opinion pieces, training sessions, interviews by North Block officials have become an every-day affairs. Discussions and debates in television news channels are plenty. Jokes etc. in social media and WhatsApp are also being circulated. Hiring a celebrity in the form of Amitabh Bachhan was made. The slogan “One Nation. One Tax. One Market” is being aggressively communicated.
And when all these efforts are seen from purely an (economic) policy point of view such kind of campaigning is like ‘never before and perhaps never after’. Therefore, obvious question that comes to mind: are all these efforts towards the announcement of a mere taxation policy needed? Perhaps not. But when looked from the point of view of the amount of time and efforts being put behind the making of such a policy is made, it is worthy of such a massive campaign. Nevertheless, the perceived benefits.
Initiated by Late Vishwanath Pratap Singh – the Finance Minister in Rajiv Gandhi Government during 1987 in the form of MODVAT (Modified Value Added Tax) and later on propagated by other Finance Ministers such as Manmohan Singh, Yashwant Sinha, P Chidambaram, Pranav Mukherjee and now Arun Jaitely, GST is an indirect tax that is supposed to be a single rate applicable to all kinds of goods and services in the country. Such a tax is expected to widen the tax base and thereby paving the way for larger tax revenue apart from reducing the transaction costs that arises from multiple tax rates on goods and services such as sales tax, excise, local taxes and etc. GST is prevalent in around 140 countries across the globe and India is the latest. However, GST in its present form as is going to be implemented from 1st July onwards is not in true sense a single tax. Rather, it is again a multiple tax structure but definitely the number of rate slabs are much lower than the earlier with only four rates such as 5, 12, 18 and 28 percent. The cess etc. shall be applicable on a case by case basis. Therefore, in true economics sense it is not GST as being propagated. Hence the sloganeering about “One Nation. One Tax. One Market” is a misnomer.
Looked differently, this move is a great move towards rationalising indirect taxes in a vast country like India. Given the political diversity of the nation with varying political ideologies and interest; and then aligning them towards agreeing to reduce their own reservations towards earlier rates as prevalent and applicable in selected items in states being ruled by them, it is an achievement on its own. What stands out is the process of deliberation from September 2016 onwards (GST Bills are passed by Parliament in August, 2016) till date when FMs of all states or their representatives meet at different places under the stewardship of Union FM Arun Jaitely and agreed to thrash out their differences and decided on rates for each and every commodities. Dissents were there but when looked from the diversity of the country and nature of goods and commodities being produced and consumed; agreeing for a common rate is a herculean task and the political leadership of not only the ruling party in centre but also in all the states deserve special mention in their commitment for this. The icing on the entire exercise being the review by PMO of the rates indicating the fact that in making of such a Pan-India policy, it is expected to go through the lenses of the highest political leadership of the country.
While the deliberations on rates were on, the mechanisms to make the entire GST compliance through on line, the massive exercise of building GSTN (GST Network) was also happening side by side. The periodic assurance from the Chairperson of GSTN in multiple public interviews, TV shows were steps towards assuring the citizens at large about the ease in filing the GST returns. The usual critique about availability of electricity, internet and other infrastructure facilities as raised by critiques were addressed by citing the examples of penetration of mobile and internet and availability of social media at every nook and corner of the country and the requirements of bandwidth for filing GST being less than what is required to down load photos and music in WhatsApp or Facebook. Such examples and comparison not only name and shame the critiques but helped removing the apprehensions from the mind of the citizens to a larger extent. Alongside this, the public appearance of Union Finance Ministry Officials including the high profile Revenue Secretary Hasmukh Adhia from time to time not only gave a sense of commitment by the concerned authority and their occasional threat and tough talking helped the people to take the matter seriously and served as a warning bell to unscrupulous elements of the business and economy. The umpteen number of training sessions organised by different arms of North Block such as Central Board of Excise and Customs for various officials, trade and industry bodies facilitated the officials to be GST ready when the time to act shall eventually come. Putting of FAQs in public domain across different languages, intimation about various rates on different commodities provided the required information to the citizens and thus helped in removing confusion regarding price rise etc. to a larger extent. And as it happens with every big initiative so also for this came Amitabh Bachhan – the celebrity- to endorse it to the citizens across India.
The road map as laid down towards rolling out of GST is definitely a classic case of a coordinated effort by all the concerned departments and agencies of the government and their involvement along with all stake holders such as consumers, manufacturers, traders, service providers, government functionaries and above all politicians. Needless to mention, it has all the essential ingredients of any corporate mega announcement of their schemes etc. But what makes this different is sheer size and diversity and likely impact on the nation as a whole. GST, as it is being rolled out in next few hours, breaks the age old stereotype regarding functioning of government machinery being slow and lethargic in doing things but in making the county GST ready this myth about functioning of government is definitely being busted. Cases and teaching materials pertaining to “Making of Public Policy: A Case study on GST” very soon shall be prepared and taught at different Business Schools, Communication Schools and Schools of Public Policy and Governance across the country lauding the efforts of government. No doubt, time will be the testimonial for the success of GST in a country like India but there is no harm in dreaming of a day when we will have one tax rate across the county that shall be decided once or may be twice in a year during the annual budget and at the end of six months and shall be prevalent throughout the year and shall be decided on the basis of macroeconomic variables such as per capita income, level of inflation, unemployment, interest rate and thus making the maxim “a nation is made, where taxes are paid” a reality and pave the way for a truly dynamic economy where empowerment of the people shall be the only objective of the government(s).
Dr. Rasananda Panda is Professor of Economics and Sonam Mathur is Research Associate at MICA, Shela, Ahmedabad -58 and can be contacted at [email protected]
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