India’s tryst with Uniform Taxation
The Goods and Service Tax (GST) has ensured participation of all in the development of all through a differential system. It stands out for furthering individual responsibility bymaking more funds available to the government without increasing rates that matter to the lower income groups. It could also increase CSR investments through increased profits, improved billing compliance plus delivery and operational efficiency. Grow, sustain, transform is what GST’s spirit robustly proclaims.
At the stroke of the midnight hour on July 1, 2017, India awoke to a reformation in the indirect taxation system, and the world watched with much gaiety. The Parliament was decked up, the Central Hall refurbished and even the microphones and headsets were replaced for the midnight sitting which had arrangements for 800 guests, including state representatives. The much-awaited Goods and Services Tax (GST) was launched with great fanfare by the BJP-led Union Government while the opposition Congress along with a few allies and non-allies decided to boycott.
President Pranab Mukherjee, whose term ends this month, said the GST is a disruptive change. “It is similar to the introduction of Value Added Tax (VAT) when there was initial resistance. When a change of this magnitude is undertaken, however positive it may be, there are bound to be some
teething troubles and difficulties in the initial stages. We will have to solve these with understanding and speed to ensure that it does not impact the
growth momentum of the economy.” Incidentally. he was the Finance Minister in the UPA Government when the Bill was introduced in the Parliament on March 22, 2011.
The Prime Minister said that the daymarks a decisive turning point, in determining the future course of the country. He described GST as a “good
and simple tax” which would ultimately benefit the people. He elaborated that GST is an example of Cooperative Federalism, and said that just as Sardar Patel had ensured political integration of the country, GST would ensure economic integration. Finance Minister Arun Jaitley said that
the GST will create a united India.”The old India was economically fragmented, the new India will create one tax, one market and for one nation.” He added, “India will awake to limitless possibilities. It marks the beginning of a new journey.”
“The old India was economically fragmented, the new India will create one tax, one market and for one nation.”
– ARUN JAITLEY
A single uniform tax levied across the country on all goods and services, aims to take away financial barriers between the states. The old system of taxation wherein the Centre and the states levied multiple taxes such as excise duty, octroi, central sales tax (CST), value added tax (VAT), etc. will hence be levied under a single tax. All goods and services have been placed under five rates ─ 0, 5, 12, 18 and 28 per cent ─ along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks. The states and the Centre will collect identical rates of taxes on goods and services and the tax income will be divided equally between the states and the Centre under States Goods and Service Tax (SGST) and Central Goods and Service Tax (CGST) rates. Except health care and education, which are in the negative list of essential services, all services will come under GST. Customs duty is out of the GST framework; and five petroleum products ─ crude oil, petrol, diesel, natural gas and aviation turbine fuel ─ have also been kept out of it for the time being and the GST Council shall decide the date from which they shall attract GST. The existing taxation system (VAT & Central Excise) will continue on petroleum products. Alcohol too has been kept outside GST, and the existing state and central levies will continue. Prime Minister Modi said that GST would lead to immense savings of time and cost. Savings of fuel due to elimination of delays at state border crossings will help the environment as well. He said GST would lead to a modern tax administration which is simpler, more transparent and helps to
The government has envisaged GST will pave the way for realization of the goal of One Nation-One Tax- One Market. It will benefit all the stakeholders namely industry, government and consumer; it will lower the cost of goods and services; give a boost to the economy and make the products and services globally competitive, thus advancing the ‘Make in India’ initiative. Under the GST regime, exports will be zero-rated in entirety and will make India a common market with common tax rates and procedures. GST is technology-driven and will reduce the human interface to a great extent, besides reducing tax evasion as the parallel economy can be brought into the tax network, yielding substantial revenues to governments.
It is farmer friendly too as all essential agricultural commodities have been put in 0 per cent tax bracket, which were otherwise charged under different tax brackets in different states. Likewise, all the food and nonfood items consumed by the poor have been pegged at 0 or 5 per cent tax slab,
thus being people-friendly.
PRESIDENT PRANAB MUKHERJEE AND PRIME MINISTER NARENDRA MODI AT THE GST LAUNCH EVENT
President Pranab Mukjerjee said, “GST will make our exports more competitive and also provide a level playing field to domestic industry to compete with imports. Currently due to cascading, our exports still carry some embedded taxes, making them less competitive. The hidden effect of cascading means that the total tax incidence on domestic industry is not transparent. Under GST, the tax incidence will be transparent, enabling full removal of tax burden on exports and full incidence of domestic taxes on imports.” The Prime Minster described GST as a “Good and Simple Tax” which would ultimately benefit the people. Earlier last month during his Russia visit. the Prime Minister had said India wants to carry along everyone with development, adding that the nation believes in ‘Sabka Saath Sabka Vikas’ not only at domestic level but also at international level.
GST for Sabka Vikas
Sabka Vikas (everyone’s development) requires everyone’s participation too. Even though everyone’s development in effect means development of our nation, pushing it onto any one or two segments of society—be that of the government or corporate houses—would be unfair and unrealistic. A nation comprises aspirations, cultures and feelings of its people cutting across communities, social status, gender and various differentiating characteristics. Economic independence and opportunities for growth and development are keys to the realization and achievement of the country’s potential. In a country where voluntary tax payment has generally not been thought of and its avoidance has been a profession by some, this will now change for the better and be impacted for benefit of all through Goods and Services Tax.
“Evasion of indirect taxes will come down dramatically in my mind. Collections of the government will rise, that is why it will create a win-win situation for the economy, consumer and manufacturers.”
– ADI GODREJ
CSR is a part of a collective objective of reaching the unreached and empowering citizens through corporate efforts. The total CSR spend is a small percentage of investments made by the governments in India, both Central, state as well as union territories. The collective objective is best achieved when all segments of the country recognize their individual responsibility to play their part in this gigantic, broad and deep matrix. GST has maximized participation of all in the development of all through a differential system. It stands out for furthering individual responsibility by making more funds available to the government from them without increasing rates that matter to the lower income groups. It could also increase CSR investments through increased profits, improved billing compliance plus delivery and operational efficiencies. Grow, sustain, transform is what GST’s spirit robustly proclaims.
* All transactions and processes to be done only through electronic mode, to achieve non-intrusive administration.
* Auto-populated monthly returns and annual return.
* Grant of refund within 60 days, and provisional release of 90 per cent \ refund to exporters within seven days. Interest payment if refund is not sanctioned on time, and refund to be directly credited to bank accounts.
* Comprehensive transitional provisions for ensuring smooth transition of existing taxpayers to GST regime, credit for available stocks, etc.
* Provisions of GST Compliance Rating.
* Anti-profiteering provisions for protection of consumer rights.
GST in the Foreign Media
“The new tax regime will replace more than a dozen state and central levies, with the aim to unify an economy of 2 trillion US dollars and 1.3 billion people into a single market.”
“India’s GST is one of the world’s most complex tax reform. Analysts expect economic growth to slow down over the next few months, but say it should pick up after the tax is fully implemented.”
“After killing currency, Modi takes a leap with India’s biggest-ever tax overhaul”
—New York Times
“India unites under GST, but this is just the beginning.”
“GST panel has failed to deliver our PM@ narendramodi’s One Nation One Tax message. GST has been made into a multiple and complex tax regime.”
–KIRAN MAJUMDAR SHAW
Services in telecom, banking, etc. have become expensive making many unhappy. The airline industry too has nothing to benefit from and pass on the gains to customers. Fuel is still out of the GST. And for the common man understanding the implications of the system has become a Herculean task.
Questions like when both the Centre and the state will jointly administer GST, how cooperative federalism would be ensured. are being raised. The not so Internet and computer-savvy small traders may have a hard time working it. But the way mobiles have reached the nooks of the country making the rural India Internet and social media savvy, they too will learn; and like all hard times for new things, this phase too shall pass. Moreover, though GST looks like a complex tax structure, it has scope for amendments. President Mukherjee assured, “In the months to come, based on the experience of actual implementation, the GST Council and the Central and state governments should continuously review the design and make improvements, in the same constructive spirit as has been displayedtill now.” The International Monetary Fund forecasts the GST will lift India’s gross domestic product (GDP) to above eight per cent.
“At the stroke of the midnight hour…India will awake” as a common market for the first time. To do the obvious is often the most difficult.”
– ANAND MAHINDRA
The GST Journey
Fourteen years ago, in December 2002, the Kelkar Task Force on indirect taxation suggested a comprehensive Goods and Services Tax based on the Value Added Tax principle. The proposal to introduce GST was first mooted in the budget speech for the financial year 2006-07. Since the proposal involved restructuring and reform of not only indirect taxes levied by the Centre but also the states, the responsibility of preparing a design and a plan of action for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers which had been formed earlier for implementation of the Value Added Tax. The Empowered Committee released its First Discussion Paper on Goods and Services Tax in November 2009.
The Constitution Amendment Bill was introduced by the then Finance Minister Pranab Mukherjee on March 22, 2011. On September 2016, after the Bill was passed by both Houses of Parliament and more than 50 per cent of state legislatures, the President of India gave his accent and the 101th Constitutional Amendment Act, 2016 came into existence. Following this, the GST Council was constituted as per the provisions of Article 279A of the Constitution. Based on the recommendations of the Council to the Union and states in respect of GST, such as model laws, rates, exemptions and other decisions on taxation were taken.
More than 160 countries have GST in some or the other form. France was the first to adopt it in 1954. It is also a widely accepted form of indirect tax in the Asia-Pacific region. European Union (EU) adopted VAT throughout Europe, replacing cascading multi-stage turnover tax and facilitated development of a common market. In Canada, GST is applicable on supply of most goods and services and is governed by Excise Tax Act. Canada’s federal GST was introduced in 1991 replacing the existing federal sales tax imposed on manufacturers and certain licensed wholesalers at a general rate of 13.5 per cent. Countries such as Singapore and New Zealand tax everything at a single rate; Indonesia has five positive rates, a zero rate and over 30 categories of exemptions; and in China, GST applies only to goods and the provision of repairs, replacement and processing services. Like India, in Australia, GST is a federal tax, collected by the Centre and distributed to the states; and in Brazil the revenue collected under GST is divided between the Centre and the states.
The Revenue Secretary, Government of India, Dr Hasmukh Adhia through a series of tweets cleared certain common misconceptions about GST for the small traders and appealed people not to circulate any unverified messages through social media.
* Invoices can be generated manually also.
* Internet would be needed only while filing monthly return of GST.
* Provisional ID will be your final GSTIN number. So start business.
* You can continue doing business and get registered within 30 days.
* Only one return with three parts, out of which first part is to be filed by dealer and two other parts would be auto populated by computer.
* Those in retail business (B2C) need to file only summary of total sales.
*New GST rate looks higher compared to earlier VAT because excise duty and other taxes which were invisible earlier are now subsumed in GST and so visible.
“The Goods and Services Tax is a transformational structural reform which will have multiple benefits – the creation of a national market, enhanced ease of doing business, greater productivity and efficiency, and improved tax compliance. This reform will result in benefits for all participants in the Indian economy, including both businesses and consumers.”
– CHANDA KOCHHAR
Initiatives to smoothen the transit
The Goods and Services Network (GSTN), created as a section 25 private limited company with strategic control with the government, to function as a common pass-through portal for taxpayers, has unveiled a simple excel based template that will facilitate the taxpayers in preparing and filing their monthly returns with maximum ease and minimal cost. The excel template is a part of GST Council’s approach to make tax compliance highly easy and convenient for taxpayers and also reduce the time of compliance to improve ease of doing business. This excel workbook template can be freely downloaded from the GST common portal (www.gst. gov.in), and can be used by taxpayers to collate all invoice related data on a regular basis. The Excel format can be used by businesses to start maintaining their data. The taxpayer can prepare the details of his outward supply on weekly or any other suitable regular interval which can then be uploaded on GST portal on or before the 10th of subsequent month. The GSTR 1 excel template workbook can be used to prepare the data for GSTR 1 return without connecting to internet in offline mode. This also benefits taxpayers in remote areas where Internet connectivity might not be good.
“GST should bring seamless credit of all taxes, efficiency & an equitable platform…There ought to be an overall +ve impact on the industry.”
The template comprises of eight worksheets. Summary of key values in each worksheet has been provided at the top to help taxpayers easily reconcile the data entered in the worksheets with that recorded in their accounting system/books to accurately prepare the return. Based on data entered in the excel sheet, offline tool will prepare a file which will have to be uploaded by the taxpayer on GST portal to create GSTR 1. Only while uploading the file on the GST portal, Internet connectivity will be required. More than 66 lakh taxpayers have activated their account on the GST portal and 25 banks have been integrated with the GST common portal and will be providing e-payment and over the counter payment facilities as well as payment through NeFT/RTGS and credit/debit card.
The government has stepped up its outreach programme through various events, workshops, media and television to reach the masses. Field formations of Central Board of Excise & Customs (CBEC), at all levels have been activated to carry out interaction with the trade and industry to help
them with the migration to GST and to clear their doubts. The field units of CBEC have run campaigns using mobile vans to reach the assesse at
their doorstep to help them with the GST migration and transitional issues. A total of 4,700 workshops have been conducted across India. An extensive multi-media campaign through print and electronic media, outdoor hoardings, etc. has been carried out for informing, educating and assisting taxpayers and other stakeholders to enable a smooth transition to GST. The CBEC has been reorganized bringing about structural changes and redeployment of human resources to ensure outreach to the remotest corner.
“GST will reduce corruption in the country.”
The National Academy of Customs, Excise and Narcotics (NACEN) have conducted extensive training programmes. In the first phase, about 52,000 officers were trained during September 2016 to January 2017 through a multi-layered training programme across India. A refresher training was also conducted on updated law, rules and procedures and a total of 17,213 officials were trained till June 23 2017. Under the Accredited GST Training Programme, 20 institutes have been certified as approved training partners to impart quality training at reasonable cost to members of trade/industry and other stakeholders. As of now 2,565 participants have been trained so far (ongoing). NACeN have also trained 2,611 officers from 92 ministries/PSUs. Further the twitter handle ask GST_ GOI attracts taxpayer queries every day. A list of FAQs based on frequent questions asked on Twitter has also been published.