- Taxes and death are inevitable, but the attempt always is to make them less painful. It was Lord Keynes who stated, “…
- Ultimately, it is ideas, not vested interests that are dangerous for good or evil” and GST implementation is clearly the triumph of ideas.
- The taxation of services was introduced for the first time by Manmohan Singh on non-life insurance, stock brokerage and telecommunication in the 1994 Budget on at the advice of Chelliah.
- The advocacy and the fanfare with which it is implemented has created considerable over-optimism on its favourable impact on productivity and revenue gains. This has built high expectations and if not realised, could lead to disappointments.
- The journey towards “one nation, one tax and one market” has just begun, and there is considerable distance to traverse.
- It must be noted that non-inclusion of petroleum products in the base of GST will cause considerable cascading. The revenue from petroleum products contribute to 35-40% of indirect taxes in the country, and the cost escalation on that account could be considerable. The multiple rates of tax have robbed its simplicity. It will not only enhance administrative and compliance costs but also will alter the relative prices in unintended ways. This could also lead to arbitrary interpretations and classification disputes. There are concerns about the anti-profiteering clause as well. Moreover, multiple rates are a sure invitation for lobbying. Despite the assurances given, there is considerable anxiety about the load bearing capacity of the technology. Above all, there is a palpable fear of the unknown—of the possible disruption coming just a few months after the chaotic experiences of demonetisation.
- Speculations are rife on the impact of GST on the economy. Much has been said about the productivity gains and growth acceleration, but with little empirical basis.
- In the short-term, implementation of GST will certainly lead to disruption in the economy, the magnitude of which remains to be seen.
- The extent of disruption depends on how well the transition is planned, the robustness of the technology platform and the speed at which economic agents will adjust to the new normal.
- The power loom sector is already up in arms as they see a hike in the rates of tax.
- The transporters will soon find that the tax paid them on fuel cannot be credited against the GST payable on the transportation services rendered by them.
- There are concerns about the rates of tax, mandated compliances and glitches in transition and investment activity is virtually at a standstill waiting to see how the reform pans.
- The much-vaunted productivity gains and growth acceleration may happen only in the long term.
via GST implementation: Here is why we should celebrate with caution – The Financial Express
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