The government machinery’s slackness in implementing one of the largest and most significant reforms since the economy was liberalised over 25 years ago was exposed by the various glitches faced by traders and firms which complained of slow processing of their returns. This vindicates the fears of West Bengal finance minister Amit Mitra, who had warned that GST shouldn’t be introduced in a hurry, and that more time was needed for glitch-free implementation. But Union finance minister Arun Jaitley stuck to his July 1 date, that he considered sacrosanct, and claimed the system was ready to handle three billion invoices. The problems today are systems and technical, and there’s nothing that can’t be solved by technology that is available. The government must be commended for reacting quickly in appointing a panel to look into the issues flagged by various stakeholders, mainly the states. Demonetisation, which brought millions of small traders into the tax net, is also one of the reasons why the Goods and Services Tax Network (GSTN) faces problems of overloading even 73 days after its rollout.
Unlike the comparison by Prime Minister Narendra Modi between the filing of GST returns and sending a message on Whatsapp, small, semi-literate traders across India are reportedly struggling to file returns, and their plight must be appreciated and acted upon in the backdrop of the government’s failure to deliver a perfect and glitch-free network. While the GST Council has rightly relaxed the deadlines for filing returns, it is hoped the government will hold constant consultations with small and medium businesses, who are the country’s biggest employers, before deciding their fate and thus that of millions of their employees.
More important is the issue of revenue collection, and its distribution. India is a vast country with huge differences in climate, food habits, languages and culture. It may be recalled that in view of this, the Constitution of India was written to reflect its federal character. No federal structure can exist without financial autonomy for its constituent units. The states have, however, agreed to dilute their financial autonomy by accepting GST. As federalism is an important constituent of GST, the Centre must, therefore, be generous in listening to the states’ concerns without prejudice. For instance, GST is taxed at the place of consumption, which means states with a higher population would benefit compared to those with a lower population. Other issues flagged by states which need attention relate to seeking relief from GST for public utility projects like irrigation schemes, as in the case of Telangana, or the need to set up a group of ministers, as suggested by J&K finance minister Haseeb Drabu, to exam
ine issues faced by taxpayers on the GSTN portal. The government must ensure GST does not end up as another tool to penalise progressive states.