Are GST rates ra­tio­nal enough for ru­ral peo­ple?

Much awaited Goods and Ser­vices Tax (GST) will be rolled out across the coun­try from July1, 2017. The GST Coun­cil has al­most fi­nalised the rates. BK Jha analy­ses its im­pact

Rural & Marketing - - CONTENT -

The im­pact of Goods and Ser­vices Tax (GST) would be a ma­jor game changer for the econ­omy for ac­cel­er­at­ing the eco­nomic growth and gen­er­at­ing more and more em­ploy­ment op­por­tu­ni­ties. The gov­ern­ment has cer­tainly taken some pre emp­tive mea­sures to keep in­fla­tion un­der check as es­sen­tial items in­clud­ing food, which presently con­sti­tute roughly half of the con­sumer in­fla­tion bas­ket, to be taxed at zero rate.

In a macro dy­namic view the GST will have cer­tain direct and in­di­rect ef­fects on In­dia’s ru­ral pop­u­la­tion; the direct ben­e­fits in­clude in­crease in the in­come lev­els, re­duc­tion in prices of goods con­sumed by them, ef­fi­ciency and in­creased gov­ern­ment spend­ing on ru­ral sec­tor, bet­ter­ment in ru­ral in­fra­struc­ture and gen­er­a­tion of em­ploy­ment op­por­tu­ni­ties.

Im­ple­men­ta­tion of the GST will thus en­able the farm­ers to gen­er­ate a bet­ter un­der­stand­ing of tax sys­tem and will also re­move the mid­dle men deal­ing which holds dom­i­nant po­si­tion presently in all deal­ings done by the ru­ral farm­ers, en­abling them to deal di­rectly and be the direct ben­e­fi­cia­ries.

The GST Coun­cil : On the toes

The all pow­er­ful GST Coun­cil re­cently met in Srinagar to fi­nalise the rates and with a broader con­sen­sus it fi­nalised rates of over 1200 prod­ucts and ser­vices. As ear­lier, health and ed­u­ca­tion re­main ex­empted. The Coun­cil has tried to be ra­tio­nal in terms of in­ci­dence of du­ties on prod­ucts

which are widely con­sumed in ru­ral In­dia.

The GST rates for all but six items were fi­nalised. Food­grains and com­mon-use prod­ucts like hair oil, soaps and tooth­paste as also elec­tric­ity will cost less from July 1 when the GST is sched­uled to be rolled out. While the Coun­cil fit­ted all but six items in 5, 12, 18 or 28 per­cent tax bracket. Prices of food­grains, es­pe­cially ce­re­als in­clud­ing wheat and rice, will come down as they will be ex­empt from the GST. Cur­rently, some states levy Value Added Tax (VAT) on them.

Union Fi­nance Min­is­ter Arun Jait­ley said, “Rates have been fi­nalised. The stan­dard rate items of 12.5 per cent and 15 per cent, plus the cas­cad­ing ef­fect of lo­cal taxes, the tax rate was go­ing up to 30-31 per cent. From that level, we have brought it down to 28 per cent.”

“Some are items to be used by com­mon man soap, oil -- that has been brought down to 18 per cent. So there will be a sub­stan­tial re­duc­tion as far as those items are con­cerned. We have kept one cri­te­ria in mind that the over­all im­pact is not in­fla­tion, in fact it brings down the costs," he added.

Jait­ley said the key fea­ture of the rate de­ci­sion has been that "tax rate un­der GST will not go up for any of the com­modi­ties. There is no in­crease. On many com­modi­ties, there is a re­duc­tion par­tic­u­larly be­cause the cas­cad­ing ef­fect of tax is gone."

"Of sev­eral com­modi­ties, we have con­sciously brought down the tax. In the over­all bas­ket there would be a re­duc­tion, but we are bank­ing on the hope that be­cause of a more ef­fi­cient sys­tem, eva­sion would be checked and tax buoy­ancy would go up,” he added.

In­di­ca­tions are clear that the GST will bring ben­e­fits to the con­sumers due to re­duced tax rates on var­i­ous com­modi­ties such as pack­aged ce­ment, medica­ments, smart phones, and medical de­vices. Pack­aged ce­ment at­tracts cen­tral ex­cise duty, VAT and other levies. At th­ese rates, the present to­tal tax in­ci­dence works out to more than 29 per­cent. If we in­clude tax in­ci­dence on ac­count of CST, oc­troi, en­try tax, etc., the present to­tal tax in­ci­dence would work out to more than 31 per­cent. As against this, the pro­posed GST rate for ce­ment is 28 per­cent.

Health­care & GST

There will be lesser tax bur­den in case of Medica­ments, in­clud­ing Ayurvedic, Unani, Sid­dha, Homeo­pathic or Bio-chemic sys­tems also. Medica­ments, in gen­eral, at­tract 6 per­cent cen­tral ex­cise duty and 5 per­cent VAT. Fur­ther, CST, oc­troi, en­try tax, etc. are also ap­pli­ca­ble in gen­eral. At th­ese rates, the present to­tal tax in­ci­dence works out to more than 13 per­cent. As against this, the pro­posed GST rate on medicines, in­clud­ing ayurvedic medicines, is 12 per­cent. Like­wise prices of smart phones are also likely to dip slightly with the pro­posed 12 per­cent GST rate.

Ac­cord­ing to the Apex health­care In­dus­try body NATHEALTH, ex­empt­ing health­care ser­vices from GST will pro­vide much needed sup­port for progress of the health­care sec­tor.

“We had rec­om­mended ex­emp­tion for health­care ser­vices from GST and ra­tio­nal rates for items which are widely used in the

In the over­all bas­ket there would be a re­duc­tion, but we are bank­ing on the hope that be­cause of a more ef­fi­cient sys­tem, eva­sion would be checked and tax buoy­ancy would go up

sec­tor. This de­ci­sion along with the di­rec­tions set by the gov­ern­ment in the re­cently an­nounced Na­tional Health Pol­icy should set a pos­i­tive roadmap for the health of the na­tion,” said An­jan Bose, Sec­re­tary Gen­eral, NATHEALTH.

“Ex­emp­tion on ser­vices and ra­tio­nal rates on medical items should also send a pos­i­tive sig­nal to the in­vestors for in­fus­ing much - needed funds into health­care and ac­cel­er­ate in­no­va­tion for im­prov­ing ac­cess to af­ford­able Health­care,” he added.

Im­pact of GST on Ru­ral Econ­omy

“GST will be a mes­siah for the ru­ral econ­omy in terms of in­creased de­mand for durables and bet­ter un­der­stand­ing of the tax­a­tion. As 70 per­cent of the pop­u­la­tion is in the ru­ral seg­ments, GST will be­come a cat­a­lyst for com­mon ru­ral mar­ket in In­dia with the re­moval of state level bar­ri­ers,” said SP Sharma Chief Econ­o­mist, PHDCCI

“The im­ple­men­ta­tion of GST is ex­pected to bring uni­for­mity across states and cen­tre which would make tax sup­port pol­icy of a par­tic­u­lar com­mod­ity ef­fec­tive. The ease of avail­ing tax credit un­der GST regime is ex­pected to boost in­ter-state trade lead­ing to achiev­ing the ob­jec­tives of Na­tional Agri­cul­tural Mar­ket,” he added.

The im­ple­men­ta­tion of GST is ex­pected to fa­cil­i­tate the im­ple­men­ta­tion of Na­tional Agri­cul­tural Mar­ket on ac­count of sub­sum­ing all kinds of taxes/ cess on mar­ket­ing of agri­cul­tural pro­duce as well as it would ease in­ter­state move­ment of agri­cul­tural com­modi­ties which would im­prove mar­ket­ing ef­fi­ciency, fa­cil­i­tate development of vir­tual mar­kets through ware­houses and re­duce over­head mar­ket­ing cost.

Since agri­cul­tural com­modi­ties are per­ish­able in na­ture in vary­ing de­grees there­fore trade is in­flu­enced by the time re­quired for

Ex­emp­tion on ser­vices and ra­tio­nal rates on medical items should also send a pos­i­tive sig­nal to the in­vestors for in­fus­ing much - needed funds into health­care and ac­cel­er­ate in­no­va­tion for im­prov­ing ac­cess The im­ple­men­ta­tion of GST is ex­pected to fa­cil­i­tate the im­ple­men­ta­tion of Na­tional Agri­cul­tural Mar­ket on ac­count of sub­sum­ing all kinds of taxes/cess on mar­ket­ing of agri­cul­tural pro­duce as well as it would ease in­ter­state move­ment

trans­porta­tion. The sim­ple uni­form tax regime is ex­pected to im­prove the trans­porta­tion time, and cur­tail wastage of pre­cious food. The present sys­tem many times, makes it dif­fi­cult to im­ple­ment tax sup­port pro­vided by the cen­tre for an agri­com­mod­ity due to het­ero­ge­neous poli­cies adopted by the dif­fer­ent states.

In­te­grated GST vs Oth­ers

Uni­form tax sys­tem would cer­tainly ben­e­fit ru­ral peo­ple. Mid­dle­men will be wiped out. En­trepreneur­ship will be en­cour­aged. How­ever, there is need to in­cen­tivise ru­ral en­trepreneurs.

“There will be need to ef­fec­tively syn­chro­nise all forms of uni­form tax­a­tion sys­tem. In­te­grated, Cen­tral, State and UT GST. Value added cred­its need to be timely set off . The IGST will fa­cil­i­tate easy move­ment of goods across the coun­try and this will cer­tainly boost ru­ral econ­omy,” said San­jay Sabran, Fi­nan­cial An­a­lyst and Head of San­jay Sabran & Com­pany.

“Uni­ver­sal set off tax paid un­der IGST against CGST and SGST will boost ru­ral econ­omy as goods move­ment across the coun­try would be easy and smooth. Fur­ther the gov­ern­ment should de­velop fa­cil­i­ta­tion cen­tre at every Mandi for gen­er­at­ing IGST on­line bills, then only ru­ral en­trepreneurs will be free from the clutches of mid­dle­men and real ben­e­fits of the new regime would be vis­i­ble,” he added.

Fur­ther­more, the gov­ern­ment should in­cen­tivise to all the billings raised in back­ward dis­tricts and ru­ral ar­eas and cre­ate con­ducive busi­ness en­vi­ron­ment in ru­ral In­dia.

GST will be a mes­siah for the ru­ral econ­omy in terms of in­creased de­mand for durables and bet­ter un­der­stand­ing of the tax­a­tion. As 70 per­cent of the pop­u­la­tion is in the ru­ral seg­ments, GST will be­come a cat­a­lyst for com­mon ru­ral mar­ket in In­dia with the re­moval of state level bar­ri­ers The Gov­ern­ment should re­con­sider the clause of lo­calised ev­i­dence for reg­is­tra­tion in var­i­ous states for pay­ment of taxes and com­pli­ance of SGST re­quire­ments

“The Gov­ern­ment should re­con­sider the clause of lo­calised ev­i­dence for reg­is­tra­tion in var­i­ous states for pay­ment of taxes and com­pli­ance of SGST re­quire­ments. In­stead of lo­calised ev­i­dence, the gov­ern­ment should per­mit uni­ver­sal ev­i­dence by con­nect­ing it through Aad­har. This will not only re­duce ad­min­is­tra­tive cost for the en­trepreneurs but also fa­cil­i­tate ease of do­ing busi­ness,” said Sabran.

Thus GST will pro­mote ease of do­ing busi­nesses, help in re­duc­tion of trans­ac­tions costs to busi­nesses, boost man­u­fac­tur­ing of goods and sup­ply of ser­vices, in­crease price­cost mar­gins of man­u­fac­tur­ers, gen­er­ate em­ploy­ment op­por­tu­ni­ties for the vast pool of young pop­u­la­tion with en­hanced pro­duc­tion pos­si­bil­ity fron­tiers and push over­all GDP growth of the econ­omy in much higher tra­jec­tory. The need of the hour is to spread aware­ness at a larger scale about the im­ple­men­ta­tion pro­ce­dure and ad­van­tages of GST to every cit­i­zen of the coun­try.

Arun Jait­ley

Union Fi­nance Min­is­ter

An­jan Bose

Sec­re­tary Gen­eral, NATHEALTH

San­jay Sabran

Fi­nan­cial Ex­pert and An­a­lyst

SP Sharma

Chief Econ­o­mist, PHDCCI

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.