{"id":32988,"date":"2018-10-29T17:49:59","date_gmt":"2018-10-29T12:19:59","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=32988"},"modified":"2018-10-29T17:49:59","modified_gmt":"2018-10-29T12:19:59","slug":"gst-a-work-in-progress","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/gst-a-work-in-progress\/","title":{"rendered":"GST, a work in progress"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/opinion\/lead\/gst-a-work-in-progress\/article22178073.ece\"><strong>GST, a work in progress<\/strong><\/a><\/p>\n<p><strong>Context<\/strong><\/p>\n<p>We need to immediately move towards three tax slabs, and eventually two Concerns<\/p>\n<p>The introduction of the Goodsand\u00a0 Services\u00a0 Tax\u00a0 (GST)raised\u00a0 much\u00a0 hope\u00a0 that\u00a0 itwould herald the emergence of a\u2018good and simple tax\u2019 with \u2018one nation, one market, one tax\u2019<\/p>\n<ul>\n<li>However, there\u00a0 has\u00a0 been\u00a0 considerableconcern with the new tax, both inits\u00a0 structure\u00a0 and\u00a0 operational\u00a0 details, including the ease of payingthe tax\u00a0 and\u00a0 filing\u00a0 returns<\/li>\n<\/ul>\n<p><strong>Considerable work still pending<\/strong><\/p>\n<p>The GSTCouncil has been quite responsiveto tweak the structure and operational details to make itsimpler.Yet, considerable work needs to bedone to ensure a smooth transition and to reap the revenue andproductivity gains to the economy<\/p>\n<p><strong>Global track record of GST<\/strong><\/p>\n<p>According to Michael Keen, of over165 countries which have adopted GST in one form or another, only 5 have repealed it (Belize, Ghana, Grenada, Malta and Vietnam), but have reintroduced the tax later<\/p>\n<p><strong>Takes time<\/strong><\/p>\n<p>It is a major reform, and even asevery country makes a lot of preparations before it is introduced, ittakes time to smoothen the roughedges and settle contentious issues<\/p>\n<p>Desirable features<\/p>\n<p>International experience suggests that some features of the GST reform are inherently desirable, like<\/p>\n<ul>\n<li>Richard Bird and Pierre-Pascal Gendron, after a detailed examination of a number of countries adopting GST, suggest that in developing countries, a threshold closer to\u00a0 $100,000 would eliminate 75% of the taxpayers with a revenue loss of less than 4%<\/li>\n<li><strong>Fewer rates<\/strong>: Another desirable feature of a successful GSTis to have fewer rates. Multiplerates create\u00a0 classification\u00a0 problems,\u00a0 are\u00a0 harder\u00a0 to\u00a0 administer and would require the general rate of tax to be higher<\/li>\n<li><strong>Testing properly<\/strong>: It is important to prepare well before theplunge. Most countries take atleast two years to prepare for theintroduction of reform to ensure asmooth transition. This is particularly necessary for developing and testing the technology platform,educating the tax collectors and tax payers and to avoid any anomalies in the structure of the tax.<\/li>\n<\/ul>\n<p><strong><u>Indian context<\/u><\/strong><\/p>\n<p><strong>Structure of the tax can\u2019t be ideal<\/strong><\/p>\n<p>Given that the reform had to be evolved by taking into account the views of 29<\/p>\n<p>States, two Union Territories with legislatures and the Union government, compromises are inevitable and it is impossible to expect the structure of the tax to be ideal. As<\/p>\n<p><strong>Problems with GST<\/strong><\/p>\n<ul>\n<li>The levy of three rates of cesses has also complicated the structure<\/li>\n<li>Having four tax rates and three rates of cesses should have been avoided<\/li>\n<li>As mentioned above, multiple rates create problems of classification, inverted duty structure and large-scale lobbying<\/li>\n<li>It enormously complicates the technology platform to ensure input tax creditmechanism<\/li>\n<\/ul>\n<p><strong><u>Solution<\/u><\/strong>: It therefore appears desirable to move immediately towards three slabs withthe finalgoal of reducing the slabs to two<\/p>\n<p><strong>Raising threshold<\/strong><\/p>\n<p>Expert opinion based on international experience shows that there is much tobe gained by having the thresholdat reasonably high levels<\/p>\n<ul>\n<li>International experience is that a threshold closer to $100,000 would eliminate 75% of the taxpayers and the sacrifice in terms of revenue would be less than 4%. Moreover, it is the small<\/li>\n<\/ul>\n<p><strong><u>Solution<\/u><\/strong>: It may be desirable to fix the threshold atRs50 lakh. The revenue loss will be minimal but ease of doing business will be high<\/p>\n<p><strong>Way forward<\/strong><\/p>\n<p>Strong political commitment, to implementing the reform, thorough advance preparation, adequate investment in tax administration and taxpayer services,extensive public education programme, support from business community and good timing of reform are the important prerequisites for successful implementation of the GST<\/p>\n<p><strong>Conclusion<\/strong><\/p>\n<p>It is also importantto note that problems of transitionto a major tax reform are unavoidable and most countriesgothrough this. In this regard, the approach of the GST Council must be commended for being receptive tothe concerns of businesses and in dealing with the glitches in technology<\/p>\n","protected":false},"excerpt":{"rendered":"<p>GST, a work in progress Context We need to immediately move towards three tax slabs, and eventually two Concerns The introduction of the Goodsand\u00a0 Services\u00a0 Tax\u00a0 (GST)raised\u00a0 much\u00a0 hope\u00a0 that\u00a0 itwould herald the emergence of a\u2018good and simple tax\u2019 with \u2018one nation, one market, one tax\u2019 However, there\u00a0 has\u00a0 been\u00a0 considerableconcern with the new tax,&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/gst-a-work-in-progress\/\">Continue reading <span class=\"screen-reader-text\">GST, a work in progress<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-32988","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704722033},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/32988","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=32988"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/32988\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=32988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=32988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=32988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}