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.
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 fullled. 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 denitely 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 prots. Therefore, even though our prots 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 full 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