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Will the four-slab GST benefit everyone?

There is no doubt that implementation of GST will have significant advantages.

The Goods and Services Tax is a step forward towards a common tax rate for India in line with the notion of “one nation, one tax”. It sounds simple, but its implementation will have to take into consideration the impact on the poor and economically weaker sections. A common tax will hit the poor harder as they will be paying the same rate as the rich. In case of excise and sales tax, that are indirect taxes, the economically weaker sections pay as much as the rich and well-off. The GST council is aware of this, and the suggestion is there will be four or five slabs, from 26 per cent at the highest level to six per cent at the lowest. Luxury or “sin” goods, as some call them, will attract the highest rate, and essential commodities the least. The aam aadmi’s dal-chawal will be left untouched. States like Kerala want a higher rate than 26 per cent on luxury goods, like 30 per cent, so that lower income people aren’t taxed.

Finance minister Arun Jaitley is said to be in favour of 26 per cent. The idea is that people’s living standards shouldn’t be due to GST, while seeking to simplify the tax system and make it more transparent. There is no doubt that implementation of GST will have significant advantages. It will push up GDP growth by up to 1.5 or even two per cent, as it will take the ease of doing business closer to reality. This will also attract more foreign investment. Today businesses have to deal with different taxes in different states, and it’s a cumbersome process. This is one of the key reasons for pushing for a common nationwide tax, that was first mooted in 2010. Most countries have a common tax which is much lower, three per cent in one case, compared to the six per cent at the lowest end proposed for India. There are some issues of concern that have been raised by tax experts — such as items that aren’t taxed now which will be taxed, which could push up inflation.

Quite a significant number of items that constitute the consumer price index already enjoy a waiver of Central excise. The question now is whether these will be brought under GST or not. Fears have also been expressed that in cases where taxes will be lowered, as in manufacturing, care should be taken that this advantage is passed on to the consumer. In the case of services, it is feared taxes could be raised with GST. One only hopes these concerns will be dealt with. Overall, it’s an exciting development and a revolutionary reform on the tax front. Consumers should be able to look forward to some benefits.

( Source : Deccan Chronicle. )
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