PER­SPEC­TIVE: GST, GOOD, BAD OR UGLY?

India Today - - INSIDE - —Prosen­jit Datta

The govern­ment is tout­ing it as the big­gest tax re­form since In­de­pen­dence. Its crit­ics (and there are a few) call it a good idea that has been man­gled be­yond recog­ni­tion. The fi­nal it­er­a­tion of the Goods and Ser­vices Tax (GST), af­ter rates were de­ter­mined for all goods and ser­vices on May 19, an­swers to both de­scrip­tions equally.

There is no doubt the GST is a gi­ant step for­ward in sim­pli­fy­ing the tax regime. By pre­scrib­ing a sin­gle tax rate for a good/ ser­vice ir­re­spec­tive of the state it orig­i­nates in, or the state it gets con­sumed in, GST brings a cer­tain or­der to tax­a­tion. But we didn’t go the whole hog. Other coun­tries that im­ple­mented GST went with a sin­gle tax rate (or at best two). Here, the Cen­tre and states have agreed on four ba­sic rates (set at 5, 12, 18 and 28 per cent) apart from a list of items that will at­tract zero tax. This was al­ready bad enough with­out the added con­fu­sion of sur­charge, which can vary from 3

per cent to 290 per cent! Even ser­vices have been care­fully di­vided into four cat­e­gories at­tract­ing dif­fer­ent tax rates.

A read­ing of the GST rates for dif­fer­ent items also raises some queries about the govern­ment’s pri­or­i­ties. For ex­am­ple, coal will be taxed at 5 per cent (from 11.7 per cent ear­lier) and so­lar mod­ules at 18 per cent (from near zero ear­lier). Like­wise, hy­brid cars will be taxed at the same rate as petrol and diesel cars, with big hy­brid cars at­tract­ing as much as 43 per cent (28 per cent + 15 per cent sur­charge). If the govern­ment is keen on re­duc­ing pol­lu­tion and pro­mot­ing clean re­new­able en­ergy, the GST rates give no in­di­ca­tion of this.

Bu­reau­crats have done their damnedest to list tax­able prod­ucts and ser­vices and it makes for some en­ter­tain­ing read­ing. One ex­am­ple: all live horses at­tract 12 per cent tax, while other live an­i­mals (in­clud­ing asses, mules, hin­nies, bovines, swine, sheep, goat, birds and in­sects) at­tract zero tax. The meat of all these an­i­mals (bovine, horse or ass) will at­tract zero tax as long as it is con­sid­ered ‘fresh and chilled’ but is taxed at 12 per cent once frozen and put in unit con­tain­ers.

Other na­tions that have im­ple­mented GST have one rate, or at best two. Here, the Cen­tre and states have agreed on four

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