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'GST made 2017 most significant year for Indian economy since 1947'

The earlier system was a myriad of central and state taxes where the movement of goods was slowed down by products being taxed multiple times

IANS  |  New Delhi 

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The 70th year since Independence will go down in Indian history since the country switched over to the Goods and Services (GST) regime, realising, thereby, the vision of a unified market in a federal system that guided the nationalist in joining Mahatma Gandhis struggle to liberate from the British.

Of course, the structural reform came accompanied with pain for trade and industry caught by the rigours of new compliance procedures. Queried by corporate leaders at industry chamber Ficci's 90th AGM here earlier this month on how was impacting through lower collections, put the onus on them.

"It is you from industry, who have been calling for so long to bring GST… and no sooner do these initial problems in implementing a reform of such scale appear, then you want to go back to the system we've had for 70 years," he said.

The earlier system was a myriad of central and state taxes where the movement of goods was slowed down by products being taxed multiple times and at different rates.

State level taxes replaced by the pan-include state cesses and surcharges, luxury tax, state VAT, purchase tax, central sales tax, taxes on advertisements, entertainment tax, various forms of entry tax, and taxes on lotteries and betting.

Central taxes replaced by are service tax, special additional customs duties (SAD), additional excise duties on goods of special importance, central excise, additional customs duties, excise on medicinal and toilet preparations, additional excise duties on textiles and textile products, and cesses and surcharges.

The new indirect regime unifying the Indian market has four slabs of 5, 12, 18 and 28 per cent.

It has a novel feature whereby goods and services providers get the benefit of input credit for the goods used, effectively making the real incidence of taxation lower than the headline taxation rate.

The second half of the year saw a radical reworking of the items within the four-slab structure by the supremely federal institution of the Council, whereby all but 50 of over 1,200 items remained in the highest 28 per cent bracket. Those retained included luxury and sin items, the cess on which goes to fund the compensation to states for the loss of revenue arising from implementing

With the Council's decisions last month, has been cut on a host of consumer items such as chocolates, chewing gum, shampoos, deodorants, shoe polish, detergents, nutrition drinks, marble and cosmetics. Luxury goods such as washing machines and air conditioners have been retained at 28 per cent.

Eating out has become cheaper as all restaurants outside high-end hotels charging over Rs 7,500 per room will uniformly levy of five per cent. The facility of input credit for restaurants has, however, been withdrawn as they had not passed on this benefit to consumers.

Petroleum, including oil and gas, is a strategic sector that is still not under GST, while the industry has been pushing for its inclusion so as not to be deprived of the benefits of input credit.

Including is another matter pending before the Council.

On the functioning of the Council, Jaitley who is its head, had this remarkable insight about the way in which it had effected such large-scale rationalisation of the item rates in a short span of "3-4 months".

"Everything has been achieved by consensus in the best spirit of cooperative federalism. There has been no politics, even from states which are controlled by opposition parties," he told a gathering of industry leaders here.

The other side of was revealed through what the described as "short-term disruptions".

With businesses going into a "de-stocking" mode on inventories in anticipation of the rollout from July and sluggish manufacturing growth, among other factors, pulled down growth in the during the first quarter of this fiscal to 5.7 per cent, clocking the lowest under the Narendra Modi dispensation.

Breaking a five-quarter slump, a rise in manufacturing sector output, however, pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18.

Besides, technical glitches appearing on the Network portal, often unable to take the load of last-minute rush to file returns, marred the filing of returns by traders, forcing the government to postpone filing deadlines several times. The glitches also led to export refunds piling up, resulting in a grave situation of cash crunch for exporters, whose working capital was getting blocked.

In the final analysis, the balance sheet is provided by Gita Gopinath, at Harvard University, who is also the to the

"is a real reform. It is a way of formalising the economy. It is a very effective way of ensuring compliance, making it harder to earn black money. I mean, nothing ever goes away completely, but it just makes it harder to make it happen," Gopinath said in earlier this month.

The icing on the cake came with the announcing earlier this year that had jumped 30 places in its Ease of Doing Business rankings to get among the top 100 countries on the list. Though reforms in India's direct regime figured among the parameters considered in evaluation, had not been taken into account by the multilateral agency since their cut-off date was June 30.

First Published: Mon, December 25 2017. 14:51 IST
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