Industry captains were looking forward to this game changing legislation that could have made it easier to do business in India.
NEW DELHI|MUMBAI: Industry is disappointed by the delay in passage of the GST bill after the opposition parties, led by the Congress, allowed the Rajya Sabha to function from December 21, but declined to support the tax reform measure.
“GST was a Congress bill. The government changed and the recommendations of the Congress, now in opposition has been incorporated by the government,” rued Ajay Piramal, chairman, Piramal Enterprises.
“The opposition is not constructive,” said Piramal who runs a business conglomerate with interests in real estate development and financial services.
Industry captains were looking forward to this game changing legislation that could have made it easier to do business in India. Sanjay Kapoor, former CEO (India, South Asia) of Bharti Airtel, says a delay in GST, will hurt the nation, industry and consumers.
“Delaying it does not benefit any of the three. A rollout of this magnitude will not happen overnight since it will require process changes on multiple levels.”
Piramal fears frequent disruptions of Parliament and delay in passing this crucial bill will affect confidence of foreign investors.
Kapoor echoes Piramal’s sentiments when he said: “GST will also improve ease of doing business which overseas investors keep taking about. If GST happens, you will see a lot more green flags from the investor community. The earlier it happens the better,” Kapoor said.
Nikhil Nanda, managing director of Rs 4,000 crore farm equipment maker Escorts felt that sentiment will be affected as business was looking for simplicity and clarity in indirect taxation through this bill. “It is disappointing,” he said.
Pankaj Mohindroo, president, Indian Cellular Association, says that GST is a huge rationalisation exercise in a nation that has multiple taxes. “GST is a huge rationalization as there are multiple taxes in India. We are all looking forward to it.
But I don’t think it impacts global sentiment because even the largest economy in the world – US – does not have a structure like GST in place. In the current scenario, a more rational tax dispensation is required which have more clarity, no retrospectivity, no harassment and offers a more trusting attitude.
GST is however a more preferred dispensation,” Mohindroo said. “If we have to make electronic manufacturing stronger, central sales tax (CST) which is at 2% (which is the margin for our industry) should be 0%. In GST, there is no CST. Most state VAT regimes are opaque, and you also have cases of inverted VAT where final product tax is sometimes lower than input tax. This needs correction,” Mohindroo said.
At Nanda’s Escorts, while tractors are exempt from excise duty, the parts manufactured attract various Modvat (modified value added tax) and other levies. GST would have provided clarity, which would have been beneficial.
“As a nation, we mustn’t adopt a myopic stance as the path forward for GST is crucial for the economy and should be beyond politics. GST will be a very big positive on the business sentiment, particularly for the foreign investors. For India to be positioned as the most attractive emerging economy destination, GST will be the biggest reform agenda to happen in the current regime.”
On the flipside, for an essential service like telecom, GST may lead to rise in prices as the tax rate will suddenly increase from the current 14% when it is implemented. Therefore, in the best interest of consumers, dropping of the 1 per cent additional tax on interstate sales and exclusion from GST is suggested,” said Syed Safawi, CEO Viom Networks.
For the white goods industry, GST implementation would have bought down prices which would have boosted demand. Currently the average tax on white goods, including VAT, excise and octroi, which certain states impose, is around 22-24%.
Videocon’s chief operating officer CM Singh said prices would have come down 3-4% if GST was implemented. “After Diwali, GST would have been a good fuel for the industry since growth rate has again come down,” he said.