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Editorial Articles


GST : A Comprehensive Statistical Analysis

Lovey Chaudhary

Goods and Services Tax (GST) has been introduced on July 1, 2017.  "One nation, one tax" is believed to be transformative, revolutionary and visionary. In simple terms, it intends to unite indirect taxes under an aegis and expedite Indian businesses to be globally viable. The Indian GST case is deliberated for effectual tax collection, checking corruption, and facilitating smooth inter-state movement of goods etc. GST was set out in the midnight of June 30 from Parliament's historic Central Hall, as a reminiscent of India's tryst with destiny moment at the midnight of August 14, 1947, with the address of President Pranab Mukherjee and Prime Minister Narendra Modi.
It has fixed four-tier tax slabs of 5, 12, 18 and 28 per cent for services. It asserts to subsume all central and state rates into a single national tax.  We have created six tax rates, and, yet, left numerous bits and pieces to the liking of the states and the Centre. The leading revenue spawning items, such as petroleum and alcohol - that bestow more than 40 percent of the state revenue - are outside the ambit of the GST. The states will linger on to levy dues as per their whims.
The GST is centered on the input tax credit method, a consumption based tax charged on the supply of Goods and Services which means; it is to be levied and collected at each stage of sale or purchase of goods or services. The GST essentially has to be remunerated by the provider of goods and services. However, in some cases, the responsibility to pay the tax tumbles on the buyer too. This reverse charge is, though, pertinent only under certain conditions.
The dominant part about GST is its self-governing mechanism to check tax evasion and magnify the tax net through a couple of clauses in this tax regime. The notable deterrent for the tax department in going after tax evaders is the paucity of manpower. It's challenging to check the small evaders.
Now that it is up and running, GST thrives to seize at least 17 state and federal taxes. To ideate, GST was not an overnight thought. Independent India's biggest economic reform till date, the goods and services tax is here and after a myriad of revisions. It is a gigantic parting from the current system, where a single rate of 17 per cent is levied on maximum services. It has been an extensive expedition of over 17 years which originated with the intent of amalgamation of indirect tax regime in the motherland. The kernels of GST in India were first seeded in the year 2000 by Atal Bihari Vajpayee, the then Prime Minister of the nation. A period further in 2005, the then finance minister P. Chidambaram, in his parliament budget session, announced that there was a grave necessity of tax reforms in India in the sphere of indirect taxation. In 2010, the then finance minister, Pranab Mukherjee, in his budget address,  said that the GST will be presented in April 2011. In the budget session of the year 2011, the 115th constitutional amendment bill was announced in the Lok Sabha for levying the GST on all goods and services, other than some definite goods which were to be kept outside the GST periphery for the value of the general public. Eventually, in 2014, the GST bill was approved in Lok Sabha as the 122nd constitution bill. And in 2016, Political parties congregated to extend their support for the Goods and Services Tax (GST) bill, and, the bill was ratified in the Rajya Sabha as well. It has been asked how India would set a successful example for the world following its application. The much anticipated GST will switch a slew of federal and state levies, in a quest to refurbish India's 1.3 billion populations into a single market.
India means to follow a dual GST structure at Federal and State level. The GST framework in India is said to be fashioned on the Canadian model, but distinctive at the same time.  If we examine other GST applications then there was a robust rebel at the time of the first course of GST by their then political division in Canada, however, GST succoured despite the opposition. The Canadian Government has been rational and toiled towards dipping the GST rate a couple of times post implementation, while several others have had to surge the rates soon after taster. However, Canadian province British Columbia implemented GST but reverted to the older system only in the span of two years.
France was the first country to implement GST to condense tax- evasion. Ever since over 140 countries have implemented GST law in various forms. Indian GST is not at all seamless as all taxes are not being fused. One of the notable differences between GST in India and GST in other countries is that two types of GST are charged (dual GST) in India. Both the levels of Government have diverse duties to accomplish rendering to the dissection of powers prescribed in the Constitution for which they need to rear resources.
GST has been a component of European tax orientation for over 50 years. It is also broadly acknowledged and favoured form of indirect tax in the Asia Pacific region. It is riveting to note that there are over 40 models of GST presently in power running through the system of various economies in the world, each with its own distinctive features.
Countries like Singapore and New Zealand tax almost everything under the sun at a single and consistent rate. Indonesia represents five positive rates, a zero rate and over 30 exemptions of categories within it. However, in China, GST is pertinent only to goods and the provision of repairs, processing, and replacement services. It is merely recoverable on goods used in the production process and GST on static assets is not recoverable.
GST is a federal tax in Australia, collected by the Centre and circulated to the States without any conflict arising through the process. On the other hand, the GST model of Brazil is much sovereign in comparison to other nations and has a dividing rule of taxes between the states and the center. In almost all cases, GST rates are prefaced between 16 to 20 percent and India has enwrapped hints from this and specked the similar pattern.
An additional aspect stumbled upon and recognized by most of the GST countries lies in the indicator that GST will be inflationary, particularly if the effective tax rate is greater than what persisted before. By way of example, Singapore inspected a spike in inflation in 1994 when it hosted the GST. That insinuates the administrators to watch for fluctuations in the prices after imposition of the tax. Malaysia was able to palliate this menace as a price control on account to an extent of the GST.
Another strategic point to be learned from Malaysia is that businesses must start early with the implementation process to be GST-ready. The Malaysian Government received stout affront even after settling 1.5 years for GST preparedness. Provided the composite GST model introduced in India and the inevitability for businesses to endure a makeover to acclimate to the GST regime, it must be challenging for the government to brave the situation.
GST is levied on transactions, which are voluminous for most business organizations, the progressions, and variations required for GST compliance need to be mechanized and netted in the IT system. It is detected that many big businesses either backfired or writhed to achieve IT makeover for having not premeditated early. It would be incorrect to undertake that IT software with GST proficiency from other countries could be embraced indiscriminately in India, due to peculiarities entrenched in the projected Indian dual GST model.
As well, the India GST system stations the small and medium enterprises (SMEs) and large-scale industries at the same level by keeping the exemption brink very competitive without any tax disparity. There is a task ahead for SMEs to be able to invest, change and read in the way similar to large-scale players.
From the examples studied, there is no refuting the fact that general public, businesses, and firms may show resistance at first in the acceptance of GST but it can be dealt with avant-garde planning, preparation and providing passable time to industry to get accustomed, unrelenting dialogues amongst businesses and administrators, involving industry after the implementation  has proved to smoothen GST implementation in many countries. Of course, GST is recognized to be a smooth tax collection system regardless of teething troubles in the preliminary implementation period.
(The Author is a working Journalist based in New Delhi) e-mail : loveeyyy@gmail.com
Views expressed are personal.
Image: Courtesy Google