Ok, I am not using disruption in a positive way here. Rather in a 'Beware, things might get so bad, the previous months will feel like good times. Hell, even the demonetization days will start looking good' kind of way!
Yes, I am talking about GST, which will hit the road starting the day after tomorrow (and any resemblance to any apocalypse themed movie title is purely coincidental and unintentional). Several countries have implemented a unified Goods and Services Tax; in most of them there is one single rate (to make life easy). India has taken a step in that direction with a 5 slab structure - 0%, 5%, 12%, 18% and 28%. There is also a 40% slab which is yet to be introduced.
There have been quite some articles in the media about how GST will be good (by the government and by the business community - the government's reasons are obvious. The businesses do not want to rub the government the wrong way). There have also been a lot of articles criticizing it - I came across this one today. While a lot of them focus on the multiplicity of rates, there are some other reasons for us to be critical of GST. And in my limited opinion, slabs are not a valid reason:
1. Slabs - Multiple slabs are a nuisance. Yes! They will make it difficult to classify things, they will give people reasons to get creative and pass off their businesses under lower rates and they will definitely give rise to protests/ threats/ representations and maybe legislation to get certain businesses/sectors/ items under lower tax slabs. But, these are necessary to limit abrupt price rises (which is why most food items are at lower slabs). Ultimately, the government will move towards one or maybe two GST rates (alcohol, tobacco and some other 'luxuries' will more likely move from 28% to 40%; everything else will finally settle down at a 12/15% rate. Yes, there will always be a 0% for some items, but that is the closest we will ever get to a single rate!). This multiplicity of rates is a necessary compromise between politics and business!
2. Increased cost of compliance - This is definitely a very valid complaint about GST. Returns need to be filed thrice each month and (apparently) in every state in which the business the operational. My reason for using 'apparently' will become apparent (for want of a better word) in the next point. But yes, the increased work in terms of filing returns will make people spend more effort on ensuring compliance and less on actual business.
3.Supreme lack of clarity - This is possibly the biggest problem. The Government had been very transparent in issuing the entire rate structure, the items covered and not covered under GST. However, because of the fact that it is very detailed, there is way too much information for people to parse (and also because by nature, we are time-starved, low on attention etc etc , most people have either not read it fully or selectively interpreted it - myself included). Also, the government has decided that it will roll (rather steamroll) GST on July 1, come what may. Indians are so accustomed to deadline extensions (we engineers perfected this in our engineering colleges), that most people thought July 1 would be missed. Now that is not going to happen!
4. Limited dialogue with businesses and media - Assuming the government is the only party that understands the true impact of GST (and I hope this assumption is not wrong), it would have helped tremendously, if the government were to give a detailed tutorial/ FAQ through Youtube/ FB/ T etc. explaining the sectorwise impact and most importantly , the impact on prices. Today, since such information is not available, everyone has a different point of view. Marketeers are making hay by announcing 'pre-GST' sales (the assumption being prices will be high post GST), builders are trying to get people to finish purchases prior to July 1 (though the govt. says that prices in real estate should come down) and dealers are refusing to stock up (due to lack of clarity on input taxes). To my mind, this bit is what is affecting people most. This is also something that has the potential of causing chaos for the next quarter!
Here's hoping I am wrong....
Yes, I am talking about GST, which will hit the road starting the day after tomorrow (and any resemblance to any apocalypse themed movie title is purely coincidental and unintentional). Several countries have implemented a unified Goods and Services Tax; in most of them there is one single rate (to make life easy). India has taken a step in that direction with a 5 slab structure - 0%, 5%, 12%, 18% and 28%. There is also a 40% slab which is yet to be introduced.
There have been quite some articles in the media about how GST will be good (by the government and by the business community - the government's reasons are obvious. The businesses do not want to rub the government the wrong way). There have also been a lot of articles criticizing it - I came across this one today. While a lot of them focus on the multiplicity of rates, there are some other reasons for us to be critical of GST. And in my limited opinion, slabs are not a valid reason:
1. Slabs - Multiple slabs are a nuisance. Yes! They will make it difficult to classify things, they will give people reasons to get creative and pass off their businesses under lower rates and they will definitely give rise to protests/ threats/ representations and maybe legislation to get certain businesses/sectors/ items under lower tax slabs. But, these are necessary to limit abrupt price rises (which is why most food items are at lower slabs). Ultimately, the government will move towards one or maybe two GST rates (alcohol, tobacco and some other 'luxuries' will more likely move from 28% to 40%; everything else will finally settle down at a 12/15% rate. Yes, there will always be a 0% for some items, but that is the closest we will ever get to a single rate!). This multiplicity of rates is a necessary compromise between politics and business!
2. Increased cost of compliance - This is definitely a very valid complaint about GST. Returns need to be filed thrice each month and (apparently) in every state in which the business the operational. My reason for using 'apparently' will become apparent (for want of a better word) in the next point. But yes, the increased work in terms of filing returns will make people spend more effort on ensuring compliance and less on actual business.
3.Supreme lack of clarity - This is possibly the biggest problem. The Government had been very transparent in issuing the entire rate structure, the items covered and not covered under GST. However, because of the fact that it is very detailed, there is way too much information for people to parse (and also because by nature, we are time-starved, low on attention etc etc , most people have either not read it fully or selectively interpreted it - myself included). Also, the government has decided that it will roll (rather steamroll) GST on July 1, come what may. Indians are so accustomed to deadline extensions (we engineers perfected this in our engineering colleges), that most people thought July 1 would be missed. Now that is not going to happen!
4. Limited dialogue with businesses and media - Assuming the government is the only party that understands the true impact of GST (and I hope this assumption is not wrong), it would have helped tremendously, if the government were to give a detailed tutorial/ FAQ through Youtube/ FB/ T etc. explaining the sectorwise impact and most importantly , the impact on prices. Today, since such information is not available, everyone has a different point of view. Marketeers are making hay by announcing 'pre-GST' sales (the assumption being prices will be high post GST), builders are trying to get people to finish purchases prior to July 1 (though the govt. says that prices in real estate should come down) and dealers are refusing to stock up (due to lack of clarity on input taxes). To my mind, this bit is what is affecting people most. This is also something that has the potential of causing chaos for the next quarter!
Here's hoping I am wrong....
No comments:
Post a Comment