Letters: Moth-eaten GST

Nothing is truer than Shyamal Majumdar’s view in his article, “A needless compliance burden” (March 31), on the anti-profiteering provision in the goods and services tax (GST) law passed now. I agree with him that it is a needless compliance burden. It is, in fact, much worse. It is an absurd, retrograde step that will open the floodgates for queries by the department on a vague concept.
 
This issue has two aspects: One, input credit and two, reduction in price. On the first aspect, input taxes paid are to be credited on the basis of actual invoice. This is the crux of the value-added tax and GST principle. There is no question of reducing price in a commensurate way. The second is a reduction in price if there is a reduction in tax rate. This also is a meaningless proposition as there are so many inputs and they are not used in the same proportion.
 
Prices of commodities are fixed or determined by competition in the market, not by rate of tax alone. It also depends on a brand’s value and goodwill. No country has such an absurd law except Malayasia, a country which can be used only as a bad example.
 
The anti-profiteering provision would be against the interest of trade and industry. It will throttle innovation. No company will invest in research and innovation if they cannot make a profit. All start-ups would be ruined as they make no income for long and when they invent something they make a one-time large profit, that too, if they succeed at all.
 
Let me also point out that Section 4 of the Competition Act, 2002, provides for action against abuse of dominant position. This law is good enough; no other controlling law is necessary to improve the “ease of business”.
 
It seems the central government was in a hurry to pass the Bill to take credit for having introduced a great reform without thinking that the so-called reform is moth-eaten.
 
Slogans such as “hawai chappal cannot be taxed at the same rate as BMW car” is another example of a demagogue speaking. Speech does not an economic reform make. What was the need for making two rates, 12 per cent and 18 per cent? There could have been one rate of 16 per cent. Now there would be enormous classification disputes setting up a lawyer’s paradise.
 
I have been writing in favour of GST for long. What we have now got is a fumbling and fractured system. Sukumar Mukhopadhyay   New Delhi

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