GST set to transform India
Credit: FWD Media Images: Various sources
Prime Minister Narendra Modi and President Pranab Mukherjee pressed a button to mark the beginning of GST in the historic central hall of Parliament. The biggest tax reform in Independent India, the goods and services tax (GST), was finally rolled out at the midnight hour on Friday. Calling the GST “a good and simple tax”, Modi said the country was moving towards a modern taxation system, much simpler and more transparent than the existing one.”
The GST replaces 17 central and state taxes, including services tax, value-added tax, octroi, duties and other charges, except Customs levy, across the country except in Jammu and Kashmir. The tax will create a common market in the $2-trillion economy with 1.3 billion people. It is expected to curb “tax terrorism and inspector raj”. At the hour-long event, former prime minister H D Deve Gowda, industrialist Ratan Tata, and Reserve Bank of India Governor Urjit Patel were present.
Former PM Manmohan Singh as well as former finance minister P Chidambaram, who had proposed the GST in the 2006-07 Budget, and other Opposition leaders were conspicuous by their absence. They had decided not to attend as they felt the GST is not ready to be rolled out. However, former West Bengal finance minister Asim Das Gupta, also the former chairman of the empowered committee of state finance ministers, was present even as the Communist Party of India (Marxist), of which he is a member, boycotted the event. The PM, however, claimed the GST would benefit businesses. “Businesses will no longer be harassed by tax officers, as all grey areas have been removed,” Modi said, adding black money creation and corruption will be curbed. The PM also said the GST would yield more resources for the poor, with an increased tax base. Hours before the new indirect tax regime was rolled out, the GST Council gave relief to agitating farmers in the kharif sowing season by lowering the rate on fertilisers to 5 per cent from 12 per cent and on tractors parts to 18 per cent from 28 per cent.
“There was uncertainty around the proposed GST rate for fertilisers. The GST Council has given approval to additional laws needed for its implementation,” said Finance Minister Arun Jaitley. On the initial difficulties businesses might face, Modi said they would have to swiftly align themselves with the new tax regime. President Mukherjee has called upon the GST Council to continue improving the design of the tax. He also said the GST would make India’s exports more competitive and provide a level playing field to domestic industry to compete with imports.
Jaitley said the GST would rein in inflation, and make it difficult to evade taxes, besides enhancing the gross domestic product growth. The Parliament building and the GST Bhavans across the country were lit up on the eve of the roll-out. Restaurants billed consumers differently before and after midnight. All goods and services have been slotted under six tax slabs: 0 per cent, 3 per cent (for bullion), 5 per cent, 12 per cent, 18 per cent, and 28 per cent. There is also a cess, over and above the highest rate, for demerit goods.