{"id":34927,"date":"2018-10-31T14:23:38","date_gmt":"2018-10-31T08:53:38","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=34927"},"modified":"2018-10-31T14:23:38","modified_gmt":"2018-10-31T08:53:38","slug":"indias-gst-is-all-tangled-up","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/indias-gst-is-all-tangled-up\/","title":{"rendered":"India\u2019s GST is all tangled up:\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.livemint.com\/Opinion\/o9u69EDJr66CUt33NkWr1H\/Indias-GST-is-all-tangled-up.html\"><span style=\"font-weight: 400;\">India\u2019s GST is all tangled up<\/span><\/a><span style=\"font-weight: 400;\">:\u00a0<\/span><\/p>\n<p><b>Context<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">There is a need to focus on making paying taxes easier and reduce costs, which was the main objective behind the goods and services tax (GST).<\/span><\/li>\n<\/ul>\n<p><b>Complexity of the situation<\/b><\/p>\n<p><span style=\"font-weight: 400;\">India\u2019s new indirect tax system &#8211; GST, which for the first time tries to standardize most taxes across this vast country\u2019s many states, is proving to be even more difficult and disruptive to implement than first feared. That speaks to the unnecessary complexity the governments introduced into what should have been the simplest of laws.<\/span><\/p>\n<p><b>What was the GST supposed to do?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Here\u2019s what the goods and services tax, or GST, was supposed to be: a simple and low, India-wide tax rate that allowed businesses to claim credits for the taxes that they paid on their inputs.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">First, the GST would bump up government revenue significantly as new products, services and producers entered the tax net.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Second, it would reduce costs and increase efficiency, vastly increasing the competitiveness of Indian firms and making everything they produced cheaper.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Third, it would make paying taxes so much easier that smaller companies would themselves seek to join the tax net, thereby increasing the size of India\u2019s \u201cformal\u201d economy and boosting small firms\u2019 chances for growth.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Fourth, it would knit India\u2019s many states into a genuine single market.<\/span><\/li>\n<\/ul>\n<p><b>Will GST permanently increase revenue?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The claim for credits might just be a one-off, a consequence of the transition between one rate and another.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">But it might also be to some extent a problem inherent in the system, if people are claiming input credit for tax at a higher rate than they pay on the eventual product.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The government can\u2019t be at all confident that the GST will permanently increase its revenue.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Impact of GST on efficiency<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A well-designed indirect tax system would reduce compliance costs for companies.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The GST is so complicated that even medium-sized companies are struggling to keep up with the rules, diverting resources that could have been devoted to productive activity.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">As for smaller companies, those who can\u2019t afford to hire a tax planner or get online daily may simply shut up shop.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The government insists that its online payment system is easy to use.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Few who have actually had to use it seem to agree, and it\u2019s their opinion that matters, not that of New Delhi bureaucrats.<\/span><\/li>\n<\/ul>\n<p><b>Conclusion<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Government need to reverse course and focus on returning to first principles. It needs to slash the number and level of tax rates. It needs to ensure people don\u2019t have to wait for refunds. It can only do that if it remembers the original motivation for the GST, that is to make paying taxes easier and reduce costs. In the multitude of last-minute, politically inspired changes to the GST, that basic economic logic has sadly been forgotten. \u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>India\u2019s GST is all tangled up:\u00a0 Context There is a need to focus on making paying taxes easier and reduce costs, which was the main objective behind the goods and services tax (GST). Complexity of the situation India\u2019s new indirect tax system &#8211; GST, which for the first time tries to standardize most taxes across&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/indias-gst-is-all-tangled-up\/\">Continue reading <span class=\"screen-reader-text\">India\u2019s GST is all tangled up:\u00a0<\/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-34927","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704816870},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34927","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=34927"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34927\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=34927"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=34927"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=34927"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}