A historic national tax reform is on the cards and Prime Minister Narendra Modi could be justifiably proud of the combined efforts of the ruling party and the Opposition that made it possible. The Lok Sabha had only endorsed the amendments made before the GST Bill was passed by the Rajya Sabha last week almost unanimously, with only the AIADMK walking out in protest. Its passage in the Lower House without dissent signalled the country may have put its faith in the single-point taxation system.
But the PM’s claim that it would end “tax terrorism” and the duality of “kachcha” and “pucca” bills, with the former generating huge sums of black money and virtually establishing a parallel trading system, may be unduly optimistic given most Indians’ attitude towards taxes. The term “tax terrorism” is unusual, coming from the PM and the establishment, as this is more the language of those at the receiving end of taxmen’s demands, such as in the retrospective tax that created a storm sometime ago.
GST is a sweeping reform, but the question is if the entire trading community will fall in line and shed the practice of dual accounting when it is rolled out in April 2017. The GST rate will define how fair or punitive the tax measure will be as this tax will hit the rich and poor alike in India, which is why the finance minister’s assurance that it will be kept at a “minimum workable rate” sounds reassuring now, with both Houses of Parliament having cleared the landmark measure.
