After raising high expectations, Finance Minister Arun Jaitley-headed GST Council has hit a speed breaker which is rather annoying. This does not augur well for the economy that needs as big bang a reform as the Goods and Services Tax, sooner than later. Given the diversity of economic development, divergence of opinion among states is not surprising. To narrow down such differences itself is the job of the GST Council. The first two meetings of the Council appeared to be quite promising, raising hopes about the roll out of the new tax regime from April 2017. Even on the opening day of the third meeting of the GST Council on October 18, it looked as if the agreement on the all-important issue of the rates would be stitched and announced the next day. But instead of a broad consensus, the three-day meeting collapsed on the second day with wide differences among the Centre and the states and within the states coming out in the open.
It now looks difficult for the GST Council to finish its work and enable the codification of rates and other important criteria for administering the most important indirect tax reform, into a Bill for passage of Parliament in the winter session. The Centre cannot escape from its blame for seeking to distort the concept of simplifying tax administration. Instead of making the GST people-friendly, the surprise proposals would put more burden on the tax payers. By flagging four slabs to include the priority, less priority, standard and so-called `sin’ goods, the whole concept of tax compliance and rationalisation has been turned upside down. The most regressive among the proposal is to slap a cess over and above the highest slab, believed to be 26% to make for the shortfalls in the revenues of the states.
As it is, the GST dispensation approved by Parliament is flawed with key items like petroleum and natural gas being kept out of the purview. It is also believed that the most of the items of use to the middle class would either be covered in the top or the standard rate which could be 18% or 20%. There would be exemptions as well for the priority goods while for the less priority ones, the rate could be 12% or so. This complex structure would surely open a gold mine for the lobbyists among different industry groups. The fresh proposals have created so much confusion that even the ground covered in the first two meetings on threshold limit and assessing authorities is lost. Let it not be a lost opportunity. Source – www.deccanherald.com [22-10-2016]