One year on in India, confusion remains over GST

NEW DELHI: At a business meeting last Friday, Hasmukh Adhia, the most senior official in India’s Finance Ministry, faced a grilling on the goods and services tax (GST).

Organised by the Federation of Indian Chambers of Commerce and Industry, the meeting with the Finance Secretary was a clear indication of the confusion that still surrounds the GST a year after it was implemented.

It was one of the biggest reform measures undertaken since independence.

The government has insisted that the GST has, among other things, led to a seamless flow of credit from the federal to state governments, allowed a freer movement of goods since online payments meant trucks no longer had to stop at state borders to physically pay taxes and widened the tax net.

The GST, implemented in July last year, replaced a labyrinth of 17 state and federal taxes and 33 different cess, with the revenue raised to be shared between the federal and state governments.

India’s version does not have one tax rate but six slabs – five, 12, 18 and 28%, as well as 0.25% for precious stones and 3% for gold.

The first four were worked out as a political compromise and the remaining two were added during reviews of the rates.

While there is unanimity that the GST is a much-needed reform in India, its implementation has been found to be wanting.

In a country that prides itself on its software engineering prowess, for instance, there have been glitches in the IT network supporting the tax.

Additionally, the six different slabs have made India’s GST one of the most complicated single tax in the world, with taxpayers having to file multiple returns.

Amit Sancheti, who runs a leather shoe manufacturing business, is among those unhappy with the implementation of the tax.

“It’s been a year but I am not getting refunds. I sell my footwear at a tax of 5% and buy raw material at 18%.

“I am owed a refund of credit every month but that hasn’t happened for a year,” he said.

“My working capital is blocked. I have to take loans from outside. The situation is really bad.”