Paramjit Singh Vohra
The Goods and Services Tax (GST) is going to celebrate its fifth anniversary in the next month i.e. July. In these five years, the country has gone through a new phase of economic reforms. It was implemented in India in the year 2017 with the idea of ’One Nation One Tax’.
This was a big and revolutionary step because then the economy of the country was at that stage where it had to prioritize the increase in revenue collection in the next economic reforms. The economic reforms initiated three decades ago had begun to linger.
Economic progress also required capital for various sectors such as infrastructure development. New social schemes were also to be started for the upliftment of the poor section and the schemes which were going on had to be expanded. It was then being realized that growth in the economy is possible only when more revenue comes in.
On the issue of revenue collection, there was a general perception for a long time that our tax system is very complex. Various types of taxes had unnecessarily frightened the taxpayers. This was the reason that people knowingly or unknowingly evaded tax and this included the merchant class. Therefore, it was a big challenge for the government that how to change this tax system?
The GST regime was implemented in July 2017. At that time, the government had set some objectives, in which revenue growth and growth rate in the economy were to be accelerated. This new tax system was also said to have two benefits for the common man, first from inflation and secondly from the rates of income tax.
However, then it was said that the government hastened to implement the GST system. Also that adequate time was not given to the various groups formed related to this Act for suggestions, deliberations.
Seventy percent of small traders did not even use computers or other technology, so how would they be able to adapt to this new tax system? Common people were also not made aware about GST, due to which it seemed that there would be confusion among the people regarding this law and legal disputes would increase rapidly. That is, an atmosphere of uncertainty was being created while implementing the GST.
However, there were repeated attempts by the government to assure that this would benefit the customer as well as the products and traders. That is why the question kept arising that when everyone benefits, then who will be harmed? After all, what is in this law that there is massive opposition to it?
The question was also raised prominently that through this law, tax related powers would be moved from Parliament to the GST Council. The image of this act was against profiteering. Due to this, big businessmen and industries were apprehensive that their social and employees’ welfare schemes would be affected by this. Small traders were apprehensive that their costs would increase in the course of complying with the various provisions of the Act.
In today’s scenario, if this Act is analyzed, then the fulfillment of the objectives laid down at the initial stage becomes its basis. Through the Act, about seventeen types of indirect taxes were removed and a uniform rate of tax was imposed on ninety-seven percent of the goods. That rate is up to eighteen percent, while earlier it was going up to thirty percent.
The direct benefit of all this was that there was an increase in the number of taxpayers, because on the one hand, while various types of taxes were abolished, on the other hand the tax rates also came down comparatively. According to statistics, in the first two years alone, eighty percent of new taxpayers joined the Indian tax system. In terms of revenue growth, there was an increase of sixty four percent in revenue within the year of the enactment of this Act.
The revenue collection in the year 2019-20 was more than Rs 12 lakh crore. However, due to the Corona epidemic, there was a huge decline in 2020-21, which was also natural. Due to the lockdown and other restrictions, the industry was badly affected and the economy went down to zero. But in the financial year 2021-22, an increase of thirty percent was registered.
With the increase in GST collection, it is clear that the economy is now on the path of recovery. However, the crisis is still not over. Inflation and growth rate challenges remain. This thinking also comes out in the analysis that why the common man has not benefited from GST so far?
On this fact it can be said that in the past the contribution of various types of indirect taxes in the GDP of the economy was around 11 per cent, whereas only seven per cent of the old tax regime has been replaced by GST in the GDP. Petrol, diesel and land related deals are not included in this. That’s why the public has not started getting benefits from it yet.
This question remains in its place even today that why the government is not bringing petrol, diesel etc. under the purview of GST? The common man is constantly realizing that the state governments and the central government are also collecting taxes on the most important fuel petrol, diesel and cooking gas. Due to this the fuel prices are increasing continuously.
The major direct benefit of the GST law has been the reduction in cash transactions. In today’s era, it is very important to stop black marketing of money in the Indian economy. Without it, it is not possible to bridge the gap between poverty and wealth. This law gives the sellers the benefit of various types of input tax credits which are an incentive for them to collect the tax.
Therefore, the business of cash has decreased in the economy for a long time. Under the collection of revenue, various such items were brought under the tax net which were not there earlier. However, there was some public protest in the initial days. Broadly speaking, it would be unfair to assume that this new tax regime has hit the unorganized sectors economically.
As for inflation, in the year 2005, when Value Added Tax (VAT) was implemented, the tax rate of twelve and a half percent was fixed on about two hundred items. Even then there was talk that inflation would increase. But the statistics testify that nothing of the sort had happened. However, the 2008 US recession had definitely affected inflation.
After the lapse of five years, it should be expected that the GST rates should be reduced in the coming times. In this context, other countries of the world should also be seen, because this affects the global credibility of our products on the issue of cost. On the other hand, now that the revenue is increasing continuously, then its direct benefit should be given to the common man through reduction in income tax rates.