Business Standard

Simply junk the entire GST law


it through patchwork amendments. Why not put in a simple GST law and then introduce complicati­ons in stages?

There is a template for doing so. When the law for taxing of services was introduced in 1994, only three services were covered. Over a period, more and more were brought into the net. By 2012, all services were taxed, except a few in the negative list. Through the years, the procedural aspects were also refined. Input tax credit was initially confined to services; inter-sectoral credit was later introduced, allowing manufactur­ers to take credit for tax paid on input services and service providers to take credit for excise duty paid on inputs and capital goods. That way, major disruption­s were avoided.

To be fair, the draft GST Act and draft GST Rules were placed in the public domain well in time and comments sought. Based on the feedback, many amendments were also made. However, the apprehensi­on that too much was being attempted, with onerous compliance obligation­s, were summarily dismissed. The consequenc­es are now all too obvious. We have a law with several provisions temporaril­y held in abeyance.

The government now wants us to forget that it rushed into the GST regime in haste, without adequate preparatio­n. And, instead, wants appreciati­on that is making the necessary changes in

Very easy:

Solution tomorrow


Fill in the grid so that every row, every column and every 3x3 box contains the digits 1 to 9 response to complaints. Certainly, the government deserves credit for admitting mistakes and quickly making needed course correction. But, this virtue will really shine through when it recognises the original mistake, of introducin­g an over-ambitious and complicate­d law in the first place.

The government can work on a new law with single registrati­on for an entity, a single tax (instead of Central tax, State tax, Integrated Tax and so on) and distributi­on of the tax to states on the basis of data collected through the returns. It can re-work its dispensati­on for export of goods and services and deemed export. All tax compliance procedures and monitoring mechanisms can be thought through, with ease of doing business as the central focus, not revenue or data collection, especially for small businesses and exporters.

When an edifice is built with too many faults and patchwork is often resorted to, the risk of the entire edifice collapsing increases significan­tly. It is better to bring down the edifice and build afresh. The present law threatens to unleash an avalanche of litigation over a period of time. That can be avoided by replacing it with a simpler law and building complexiti­es as more experience is gained. # 2366

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