ECON­OMY

The newly im­ple­mented GOODS AND SER­VICES TAX (GST) has re-struc­tured the com­plex tax­a­tion sys­tem of In­dia. Citadel cor­re­spon­dent Aakanksha Chopde speaks with the city traders and restau­ra­teurs about the new tax regime and its im­pli­ca­tions.

Citadel - - CONTENTS -

Break­ing down the newly im­ple­mented GOODS AND SER­VICES TAX (GST) and what it means to Pune’s busi­nessess

On the his­toric mid­night of June 30, 2017, In­dia en­tered into a new era of tax re­forms. The Goods and Ser­vices Tax was launched through­out the na­tion, chang­ing the face of the tax­a­tion sys­tem to the core. Be­ing hailed as one of the big­gest eco­nomic re­forms since 1947, GST has re­placed a num­ber of in­di­rect taxes, sim­pli­fy­ing and mak­ing t he tax­a­tion sys­tem more trans­par­ent and cor­rup­tion-free. So, what is GST ex­actly? To be­gin with, it is an in­di­rect tax col­lected by in­ter­me­di­aries (like re­tail stores) from con­sumers, and it is ap­pli­ca­ble through­out In­dia. The in­ter­me­di­ary later les tax re­turns and for­wards the tax pro­ceeds to the Gov­ern­ment. It is con­trasted with di­rect tax that is col­lected di­rectly by the Gov­ern­ment from the one whom it is im­posed on. Sales Tax, Per Unit Tax, Value Added Tax (VAT) are other in­di­rect taxes. GST has re­placed a num­ber of in­di­rect taxes that were charged by the State and the Cen­tre, mak­ing the whole process a lit­tle sim­pler. Out­side In­dia, GST is charged in more than 140 coun­tries. The GST coun­cil, with the Fi­nance Min­is­ter of the coun­try as its Chair­man, gov­erns it. Prior to GST, the Cen­tral Gov­ern­ment col­lected three ma­jor types of taxes, namely Ex­cise Tax (tax on pro­duc­tion and man­u­fac­tur­ing of goods), Ser­vice Tax (tax on the ser­vices pro­vided by the vendor), and Cus­toms Tax (tax on in­ter­na­tional trade), whereas the state gov­ern­ment was re­spon­si­ble for col­lect­ing VAT (tax on the goods dis­trib­uted within the state), Cen­tral State Tax (tax on the move­ment of goods from one state to another), in ad­di­tion to Oc­troi, Lux­ury Tax, Entertainment Tax, to name some. Af­ter hav­ing to ad­here to GST, the whole in­di­rect tax mech­a­nism has changed to a great ex­tent. GST is the amal­ga­ma­tion of all in­di­rect taxes, with the ex­cep­tion of Cus­toms Tax. Ide­ally, GST is a sin­gle tax sys­tem. How­ever, In­dia has adopted a dual GST, thereby im­ple­ment­ing two types of GST in the na­tion, Cen­tral GST and State GST. Be­sides, we have IGST, the In­te­grated GST, for the in­ter-state sup­ply of goods and ser­vices, levied by the Cen­tral Gov­ern­ment. It is also ap­pli­ca­ble on im­ports. This three-fold sys­tem en­sures that both the goals of GST, one na­tion,

one tax and the dual tax sys­tem are fullled. As re­gards hav­ing bet­ter un­der­stand­ing of GST, we must rst un­der­stand t he pre­vi­ous tax­a­tion sys­tem that it has re­placed. Di­rect Tax con­sti­tutes In­come Tax and Cor­po­rate Tax, on t he other hand, In­di­rect Tax (be­fore GST) com­prised of many taxes, which were levied by the Cen­tral and State gov­ern­ments. GST is a con­sump­tion based tax, ie, the tax is re­ceived by the state in which the goods and ser­vices are con­sumed. Un­der the GST law, a tax­payer will be re­quired to fur­nish three tax re­turns monthly and one an­nual re­turn. This can be led online too. More­over, GST is a man­i­fold sys­tem that is di­vided into dif­fer­ent slabs or cat­e­gories. Take a look at the some of the var­i­ous com­modi­ties that come un­der the var­i­ous slabs of GST in the ta­ble on the fol­low­ing page. On ask­ing about the new tax re­form, Dr Surekha Ron­gate, Head of the Eco­nom­ics De­part­ment at Fer­gus­son Col­lege, says, “This move by the Gov­ern­ment is re­ally com­mend­able. Though it won’t make much dif­fer­ence for the cit­i­zens of the lower in­come groups, it would denitely be­come eas­ier for the Gov­ern­ment to gen­er­ate more rev­enue from the rich. I think the Gov­ern­ment should fo­cus more on bridg­ing the gap be­tween the rich and the poor.” “The peo­ple re­sid­ing near the bor­der ar­eas will now be pur­chas­ing com­modi­ties from the state where State GST is lower, thereby af­fect­ing the rev­enues of states. Also, I feel that more aware­ness, say, through speeches and ban­ners, is nec­es­sary,” adds Dr Ron­gate. Ja­garam Jat, who owns a gro­cery store, com­ments, “I think GST will take time to reach traders like us. Ow­ing to the in­clu­sion of Goods and Ser­vices Tax, the prices of es­sen­tial food items like ground­nuts and sago (sabu­dana) have dipped a lit­tle, bring­ing a lit­tle re­lief to the cus­tomer.” Ganesh Shamb­hu­das, a trader of au­to­mo­bile parts, opines, “The Gov­ern­ment should have tested the whole sys­tem on trial and er­ror ba­sis, be­fore mak­ing it a part of the In­dian econ­omy. Cur­rently, there is an air of chaos with re­gard to its im­ple­men­ta­tion. The peo­ple and the traders, both should have been given an idea about the uc­tu­a­tion in the rates of com­modi­ties, mak­ing the process smoother.” As for GST’s ap­pli­ca­bil­ity and ac­cept­abil­ity, it has been widely ac­cepted by peo­ple from all the var­i­ous strata of the so­ci­ety, but there are cer­tain short­com­ings that can’t be over­looked. The Gov­ern­ment’s de­ci­sion to levy 12% GST on the san­i­tary nap­kin has trig­gered an un­rest in so­ci­ety. The ac­cess to proper hy­giene and san­i­ta­tion is a right of ev­ery

woman, espe­cially in a coun­try where 88% of the women can­not get their hands on san­i­tary nap­kins and tam­pons. This par­tic­u­lar move of the Gov­ern­ment has been crit­i­cised by var­i­ous sec­tions of so­ci­ety. To add in­sult to the in­jury, items like sin­door, ban­gles and bindis are ex­empted un­der GST, ques­tion­ing as to what the gov­ern­ment pri­ori­tises. GST cov­ers a wide range of goods and ser­vices, but there are items that are ex­empted from it. The ex­emp­tion list in­cludes ser­vices of­fered by Tri­bunal/ Court, (District Court, High Court and Supreme Court) du­ties per­formed by Mem­bers of Par­lia­ment, State Leg­is­la­ture, Pan­chay­ats, Mu­nic­i­pal Cor­po­ra­tions and other lo­cal au­thor­i­ties and Chair­per­son/ Mem­ber/Di­rec­tor of Public Sec­tor Units (PSUs). In ad­di­tion, it ex­empts fu­neral

ser­vices, sale of land and build­ing, lottery, bet­ting and gam­bling, a book debt, bill of ex­change, prom­is­sory notes, elec­tric­ity, liquor, pe­tro­leum and stamp duty. Ex­plain­ing the GST mech­a­nism in de­tail, Mrs Swati Kale, Owner of the Anandi din­ing hall, Sin­hagad Road, says, “We work in the com­po­si­tion scheme, which for­bids us to levy 12% - 18% tax from the cus­tomer. Hence, the 5% ad­di­tional tax will now have to be paid from our prots. There­fore, even though our prots are re­duced now, I am sure they will be back to nor­mal, once GST reaches the grass root level. It will take time though. Pre­vi­ously, we (hote­liers) used to in­clude all the taxes in the bill it­self. But now, some hote­liers, in­stead of re­plac­ing the for­mer 22% tax with 18% un­der GST, levy this 18% ex­tra.” GST is be­ing hailed as one of the big­gest eco­nomic re­forms since 1991, and has gen­er­ated a favourable public opinion. How­ever, the fo­cus should now shift to its ef­fec­tive im­ple­men­ta­tion. The re­form needs to pen­e­trate to the low­est lev­els of the econ­omy in or­der to full the hopes that ad­here with it. In­dia is march­ing to­wards be­com­ing a su­per­power, and this bold move is cru­cial to the jour­ney.

Dr. Surekha Ron­gate

Ja­garam Jat

Ganesh Shamb­hu­das

Swati Kale

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