prudent step

Source: The Hitavada      Date: 25 Dec 2018 11:57:48

THE Goods and Services Tax (GST) Council, headed by Finance Minister Mr. Arun Jaitley, on Saturday, took a pragmatic and prudent decision to bring down tax rates under the new regime on several items of mass consumption. This was in tune with what Prime Minister Mr. Narendra Modi had promised that the Government’s aim was to bring 99 pc of the goods and services to below the 28 pc rate basket.

He had said, only the luxury items and some of the sin goods would remain in the higher bracket of 28 pc GST. Accordingly the GST Council has slashed the rates on many items leaving luxury goods and services in the higher bracket of tax rate. The aim is clear, to give the consumer respite from high prices of goods and services and spur demand and thereby give a much needed boost to economic activity in the country. The revolutionary indirect tax regime has not only been welcomed by domestic business, corporate sectors and the common man but also foreign investors. 

It now appears that the indirect tax regime under GST is getting settled and the Council is constantly reviewing its impact on Government’s revenue earnings, the consumers’ response and also that of the business community. There were initial hiccups after the GST regime came into existence, causing disruptions in trade and business. But that appears to be a temporary phase. Any new system is bound to take some time to settle down and begin to yield results. That phase of wider acceptance appears to have now arrived. That more and more businesses are now registering under the new tax system is indicative of the fact that GST system is gaining roots. That will give much needed boost to compliance under the GST system.

On its part the GST Council is constantly reviewing the whole gamut, including the rates of taxes. Indeed rationalisation of the new tax system is an ongoing process and therefore requires periodic review. That the GST Council took the decision to slash down tax further at its 31st meeting shows that it is quite a busy body, alive to reactions and ready to listen to suggestions coming from various sections of stakeholders.

The latest rate cut would cause a Rs. 5500 crore revenue loss to the exchequer. But the Finance Minister does not seem to be unduly worried over such revenue loss. Because he has expressed confidence that the Government would be able to meet its fiscal deficit target of 3.3 pc of GDP. But still there appears to be some concern that the indirect tax revenue is lagging behind the direct tax revenue. However, business people feel that the indirect tax revenue will soon witness buoyancy with demand picking up and also tax net widening. This should answer the Finance Minister’s worry.

While the Government has done its part in reducing the tax rates on items of mass consumption, the ball is now in the court of the corporate sector and business people to pass on the benefits of tax cuts to the consumer. But unfortunately there is still reluctance to do so. For example, the GST Council has offered various tax incentives to the real estate sector with the hope that the concessions thus gained would be shared with the purchasers of flats and properties. However, this is not happening. In such a situation the role of the newly constituted anti-profiteering authority becomes more important in safeguarding the interests of the consumers.

The ultimate aim of bringing a plethora of indirect taxes under one umbrella is to make tax compliance less complicated, pass on benefits of lower taxes to common man, spur demand for goods and services and give boost to investment and economy. This is a major measure in ensuring ease of doing business. To realise these aims every stakeholder must play his/her part.