GST: What happened after three years of GST

On July 1st, 2017, PM Modi has revolutionized the entire system of indirect taxes at the stroke of the midnight with the introduction of GST. The good old Masterstroke! This was the second substantial course of action by the NDA government after demonetization and citizens also had high hopes from it. Again, the Prime Minister came to address the nation late at night. The same old ambitious promises.

Sunday, July 12, 2020

/ by Avishek Bera
GST: What happened after three years of GST

The News Cover: On July 1st, 2017, PM Modi has revolutionized the entire system of indirect taxes at the stroke of the midnight with the introduction of GST. The good old Masterstroke! This was the second substantial course of action by the NDA government after demonetization and citizens also had high hopes from it. Again, the Prime Minister came to address the nation late at night. The same old ambitious promises. 

People were again made to visit the government offices more so frequently than ever. The same nightmare of rules being changed everyday. The same old justification by the people- ' all this suffering is for the betterment of the country.' It seemed as if the night of November 8th, 2016 was repeating itself. We all have realized by now that remakes are never worthwhile, be it remakes of films or songs or be it a nationalist scheme by the government. Today we'll talk about the three year long journey of Goods and Services Tax and its affect on our economy. 
The prime aspiration of the Modi government behind GST was to streamline the complex indirect tax system in India. Before GST, our indirect tax system was as convoluted as some mathematics problem. There were several taxes separately for Center and States. For example, Center excise duty, Additional duty, CVD, SAD, Service tax, Surcharges and Cess levied by Center. Then for states, there was VAT, Purchase tax, Central Sales Tax, Entry tax, Surcharges and Cess. 

On 1st July, 2017, all these taxes were eradicated and merged into one- Goods and Services Tax. It seems as if BJP adores the number- 'one'. They keep on including it throughout. One Nation, One Tax! One Nation, One Election! One Nation, One Ration Card! One Nation, One Flag! One Nation, One Party! Anyways. Let's move forward. With GST, government centralized the existing federal structure of our tax system. 

This meant that now a consumer in Kanyakumari will be paying the exact same tax as that in Kashmir which will be determined by the central council. The government also guaranteed that GST will source around 2% increment in our country's GDP growth rate. They also claimed that all the states would be able to surpass their revenue collection by 14%. 
They projected GST as a revolution. Not sure about GDP but the hastily implemented GST certainly has raisen our blood pressure Even the revenue collection didn't improve. Today we are at a stage where Center has to pay Rs. 36,400 crore to the states and is still in debt. Although, it isn't true that GST was a inadequate idea. Actually, even the UPA government was struggling to bring GST in India for years. 

In fact, the then Chief Minister of Gujarat, Narendra Modi was against GST and used to censure the central government for this plan. Then what occurred that everybody had a change of heart and conceded to GST. There are two sides to every coin- the right and the truth. Theoretically speaking, even Science is not an unpleasing subject but it is the practical that we are never prepared for. GST also had this very anomaly, Although occasionally, some practicals worked out fine as well. As aspired, there were no long ques of trucks at the state borders anymore. There is no doubt that this had made the transport of goods across the country much easier. There was a unified and identical tax system across the nation. 

The digitization of tax system was also initiated in tandem with GST. Although, a country where we couldn't even painlessly go through a video call, filing tax returns digitally was still a far-fetched objective. Let's talk about it in a short while. It was also forecasted that inflation would rise as a consequence of GST which was admirably avoided by the government. So if there were so many benefits, GST must've proved to be fruitful. Don't be happy too soon. This is India and here the situation gets worse after interval. So what happened that transformed this Good and Simple tax into- "Gabbar Singh Tax". 

Now when GST was a much-needed initiative; Congress and BJP were both in agreement with it; After the assurance of 14% rise in revenue collection, all states government also conceded to GST; then what went wrong? The problem was same as with any New Year resolution- failed implementation. When the principal agenda of GST was to simplify and unify the tax system, GST itself turned out to be so intricate that the sheer time needed for it to be acknowledged made our economy fall into shambles. GST could've been studied and outlined better. 

But as you can imagine, until the decision is not taken in a flash, it is not appreciated as a Masterstroke. Forget the population, even the government wasn't lucid about what rates are to be levied, how much to be levied and so on. Whether chapati should be charged with the same rate as that of a 'parantha' or not! In spite of the catchphrase 'One Nation One Tax', there was an entire range of tax slabs offered by the council. From 0% to 28% , there were more options in GST than Amazon. 
Moreover, liquor and tobacco products were kept out of the scope of GST which could have generated more revenue. This didn't prove to be beneficial for the people. Later, when the States weren't able to fulfill their GST targets, compensation cess and other duties on these products shot up. New cess kept on erupting everyday such as the Indian news debates. The tax evasion exceeded government's expectations because the recent invoice system turned out to be horrendously complex. 

This gave many people a getaway to cheat. Entire system was largely depended on invoice matching, but the online platform for this matching was poorly designed. This made the fake invoices in cottage industries to increase by all means. To combat this, the government had to give more power to the tax officials. 

So neither GST proved to be straightforward tax system, nor it helped in eradicating corruption. Besides poor implementation, GST had some major glitches; the government gave as much attention to those glitches as the news channels give to news. Government didn't work upon rectifying these issues but when qualified experts expressed their concern, Finance Minister frankly remarked. 

I guess you can only expect hangover from a 12 am plan and not logic! First, it was brought up in a haste; then the IT backbone failed and above all the overconfidence. In case the states are not able to achieve 14% growth in their revenue collection, Government promised them compensation of, "3 times the taxes" I mean that the central government will bear the difference for the states. 

Then what- neither did the states fulfill their target, nor did the government had the capital to compensate. We'll tell you what happened successively in the next point but let's first talk about what was wrong with the scheme itself. The e-way bill system was implemented in a hurry without adequate infrastructure and naturally it failed. Then GST not just fell short of its target but the revenue collection even decreased below previous years' collections. Despite the sharp reduction in tax burden, there was no decrement in MRP. 

What happened that even after decreasing the tax rates, consumers like you and I couldn't benefit at all. Consequentially, consumption shrunk that made the GDP decline and economy fall into ruins. The side-effects of GST were apparent even in 2017. But today, after three years of GST, these side-effects have grown exponentially such as any pandemic. 

Then there is the lock-down which caused more harm than good to the economy. Government claimed huge returns in GST. Here, the government and the people is in complete tandem. Neither remembered those fat promises. Both government and us can let go of those promises but the economy would have to face the reverberations. 

According to government's own organisation CAG, GST has failed to live up to its full potential. The 2018-19 actual GST collection was way below the budget estimate for the same. Anybody can fail their own expectations but GST caused the indirect tax collection to decline by 10% from the pre-GST era. All the states were already demanding their promised compensation from the states even before lock-down. 

The government finally released that compensation recently. Post lock-down, the states' revenue collection is going downhill. Center's GST collection dropped by 87% in April. In comparison to 2019, the scenario is getting far worse everyday. Presently the situation is so bad, that it is being advised to the GST council to borrow money to compensate the states. Borrowing money to lend to others. What a Masterstroke! Center is nowhere close to compensating the states, poor state governments are hiking up alcohol and fuel prices continuously. 
Government is distinguishing between chapati and 'parantha' now to gain extra revenue somehow. As usual, the aftermath is left upon us to face. We are also very considerate people. Lost in nationalism, Tik-tok and whatsapp, Indians have only one answer to this- "We don't care about economy at all." Whether it is 3 years or 30, whether economy or the country is in ruins, until China's economy is under "threat".
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