Clarity after Srinagar summit

TNN Bureau. Updated: 5/23/2017 12:25:41 PM Edit and Opinion

Finalisation of rates for most of the goods and services by the GST Council at its Srinagar meeting is a sure-shot step towards the GST rollout from July 1, with focus shifting to the implementation details with minimum disruption to the trade and industry. So far as the rates are concerned, it is ‘gain some, lose some’ much like the annual budgets of the Centre and the states.

There would always be arguments on the merit of a structure that brings down prices of sports utility vehicles and increases those of small cars or whether washing machines and air conditioners should be bracketed under the so-called ‘sin goods’ at 28%. When a gigantic exercise is underway, these discrepancies would be conspicuous here and there; the moot point is how the big picture look like. On the face of it, the way goods and services have been subjected to treatment of the new single tax that will ensure uniform prices throughout the country for a majority of items, the GST rollout should result in more of accruals than losses for most of the households.

Yet, the revenue streams for both the Centre and the states seem to have been protected with the cess on top of the 28% rate on a large number of items which are either consumed by well-offs or are hazardous to health. So, it would not be inflationary even in the initial years of the rollout, though those claiming big price cuts should listen to what Chief Economic Adviser Arvind Subramanian has said: “Broadly, the incidence would be slightly lower.” But there is no denying the fact that going forward, there should certainly be larger gains to the economy as a whole.

However, the bigger challenge would be the way the entire concept of ‘input credit’ available to the supplier of goods and services is implemented and the benefits passed on to the consumers. Several of the goods and services, like telecom and financial services, have been brought up to higher rates than the existing tax incidence on the premise of ‘input credit’ being seamlessly moving through the value chain and eventually getting passed on to the consumers. Though the provisions like anti-profiteering have been brought in the enabling GST laws, it would be difficult to supervise the implementation of the system on a large scale.

Besides, it remains to be seen to what extent a large portion of the informal economy, outside the tax net, joins the GST regime based on the economic advantages accruing from systemic efficiencies, rather than enforcement which has its own problems like corruption.


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