Caught In The GST Logjam

C H Unnikrishnan says the GST logjam along with failed land Bill has badly affected the image of the Narendra Modi government.
Though the Government contention that it may convene the second part of  the Monsoon Session of the parliament to pass key legislations after reaching a consensus with all political parties has revived industry’s hope that the GST Bill will get passed, the industry leaders have shown their acute distress over the new government’s failure to keep its promise even after a year in power. The corporate captains had in a plea last week asked the law makers that the legislations like GST must not be stalled by the “perpetual disruptions” in Parliament.
The GST logjam has become yet another issue after the failed land reforms that has badly affected the image of the Narendra Modi government, which had promised progressive changes in the country in its “ease of doing business” campaign.
An online petition signed by more than 15,000 people, including industry leaders such as Adi Godrej,  Sunil Munjal, Rahul Bjajaj, Kris Gopalakrishnan, Kiran Mazumdar-Shaw, Anu Aga, Ajay Sriram among others emphasised that GST has taken a long time in coming and has taken years of consensus building.
“Important laws like the constitutional amendments in goods and services tax, which improves India’s growth rate is held up,” they said.
In the Monsoon Session, which got over on August 13, the government had introduced the Bill in Rajya Sabha, but it failed in face of a protesting Opposition.
“GST could significantly contribute to the growth of the country and its states,” say the corporate leaders.
Godrej Group chairman Adi Godrej says the GST is one of the most critical reforms for India as it will create a smooth and efficient market, lower costs and raise tax revenues. “It will certainly help generate millions of new jobs so it’s unfortunate that it gets delayed due to one or other reason,” he added.
Others in the industry echo the same views.
“Indian Industry has been pleading for early implementation of GST for the past 5 years. Since replacement of existing indirect taxes levied by central and state governments by GST is good for the country and therefore political differences should be kept aloof by law makers in passing of the Constitutional Amendment Bill related to GST,” says Sumit Mazumder, president, Confederation Indian Industry (CII), one of the key representative body of Indian industries.
Although the GST reform has been on the cards for more than a decade, lack of consensus among state governments, including the Gujarat government, which was then headed by Narendra Modi as the chief minister.
GST is expected to usher in a uniform tax regime across the country. But since it broadens the base through the territories of states and the Centre, a constitutional amendment is necessary. While it will simplify tax administration, it will also eliminate economic distortions in production, trade and consumption as it streamlinea several indirect taxes under one title.
According to Finance Minister Arun Jaitley, implementation of GST will help adding at least 2 per cent to the national gross domestic production or GDP considering the efficiencies of the new system that gives credit for taxes paid on inputs at every stage of the supply chain and taxing only the final consumer. It also avoids duplication of taxes and thereby cuts production costs.  But the other argument is that it may have impacts on the states’ revenue and their political autonomy. So the critics say that the positive impacts of GST are yet to be proved on a practical level.
The industry bodies claim that GST will subsume various levies like excise duty, service tax, VAT, CST, entry tax and octroi. “GST will remove state-wise barrier, entry forms as well as check-posts. Manufacturers can think of “one India” as a customer if properly positioned,” according to CII.
“A large number of central and state taxes will disappear and it would mitigate the cascading effect of taxation in the value chain. Exports are likely to go up as Indian products will become competitive both at domestic and international markets,” said the CII head in an email interview.
Asked about alternative solutions to the introduction of GST Bill, the CII said; “The main purpose of the constitutional amendment related to GST is to empower central government to tax goods beyond the manufacturing stage i.e upto retail stage and allow the state governments to tax services.  This increase in taxation base cannot be achieved without amendment of the constitution.”
Modi’s Reforms In A Logjam; Read Businessworld magazine 24 September Edition


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