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- Ishita Gupta (ishgupta.97@gmail.com)
As the calendar changed to 1st July, India welcomed a new tax regime in the form of GST (Goods and Service Tax). The new tax regime was introduced by President Pranab Mukherjee and Prime Minister Narendra Modi in the parliament. However the unified form of tax policy may have not suited Indian population atleast by now. Decline in GDP and the response by the general public indicate the negative effects that GST has brought with it.
The disruption caused by implementation of G.S.T. was confined to the informal sector of the economy and it has largely bottomed out in July. Its effect will now taper off , “said Rajiv Kumar, Vice Chairman of NITI Aayog, speaking to a national daily. Past no less than 100 days since GST kicked in, from 1st July ,2017 an ambitious shift to a modern, transparent and technology driven indirect tax system, is yet to settle down.
Total tax collection in India (Direct & Indirect) currently stands at Rs 14.6 Lakh Crores, of which 34% comprises Indirect tax, a relatively higher share of Total tax in comparison with the developed countries, which consequently formed the premise of new GST regime, having tax slabs for Goods and Services under the brackets of 5%, 12%, 18% and 28%, comprehending 17 central, state and local (Direct & Indirect)taxes, thereby minimising the cascading effect of taxation.
While Indian Economy has been struggling to recover from a shock Demonetisation, which came about 8 Months after the central government cancelled old currency, the government seemed positive over GST implementation, until the transition witnessed inevitable shocks.
India’s GDP growth significantly slowed to 5.7% in June quarter, slowest in 3 years, according to sources. Attributing on lower GDP growth to a leading national daily, Union Finance Minister, Arun Jaitley expressed hope that the Indian Economy will grow at 7%. “ Since it was announced that GST would come into operation from July 1, most manufacturers were de-stocking during the April-June period. As a result trading went up because sales were taking place but it was stocks which were being sold. No new manufacturing happened, said the union finance minister.
While large businesses have their own IT systems and resources to meet the requirements of GST, the Informal sector of the economy, comprising Small and Medium Enterprises, bore the brunt of mutation, struggling to cope up in the first two monthly tax-filing cycles. Technical glitches, including tax payment not getting reflected in their wallets at the time of filing returns, absence of certain software utilities and non responsiveness of GSTN website led federal tax body to extend various deadlines. “Lack of awareness and education about GST affects compliance of traders in smaller towns. More than 60% of traders do not have computers which makes it a challenge for them”, said Praveen Khandelwal, Secretary General CAIT, speaking to a national daily.
However, after receiving complaints from various sources and observing the response towards the new tax regime, 22nd GST council meeting decided to bring some changes to simplify procedure of filing tax return and also lowered tax rates for 27 commodities.
The latest world economic outlook report, released ahead of the annual meetings of IMF and World Bank in Washington, puts China at 6.8% slightly ahead of India at 6.7% in terms of growth rate of the year 2017, attributing it to demonetisation and GST. According to the World Bank, GST is expected to disrupt economic activity in early 2018, but has momentum to pick-up.
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