Are we ready for GST?

After more than a decade in the making, the countrywide rollout of Goods and Services Tax (GST) is just hours away. Union Fince Minister Arun Jaitley has made it clear that there is no question of deferring the launch of the new indirect tax law on the stroke of midnight on June 30. To impart the occasion with maximum symbolism, Parliament will meet for a special hour-long session at Central Hall for the launch of the ‘One tion One Tax’ regime. The Congress, Trimool and several other opposition parties will stay away from the proceedings; they are accusing the ruling dispensation of ‘publicity gimmick’ in seeking to imbue the parliamentary session with the ‘tryst with destiny’ spirit of the 14-15 August midnight session in 1947. So the politicking has already begun over GST, but the main demand of opposition parties is that the country is not yet ready to switch over to GST, and that its rollout should be deferred by at least six months. Fince Minister Jaitley has argued that this is “constitutiolly impermissible”, because as per constitutiol mandate, the government will lose the right to collect taxes from September 15 unless there is an alterte system in place. He has also expressed the hope that the system “will smoothen out”. Seeing how our banks floundered about in the immediate aftermath of demonetisation, the Fince Minister may yet be taking a very optimistic take on the situation about to unfold. The Central government has gone on a publicity drive, but it is a moot question how far it is percolating down to traders and tax assessees on the ground. The teething troubles in a state like Assam could develop into a full-scale chaos over the near term, with barely half the business entities with required yearly turnovers registered on the GST portal. The State Fince department has claimed that Assam is ready to usher in GST, but there are complaints galore about the IT infrastructure in the State not being upto scratch, about assesses facing many hassles in uploading their details while many others are yet to receive their codes. 

It has to be remembered that the GST system will operate completely online, requiring over three dozen filing of IT returns in a year. Traders with required turnover have been given a month to register in the new system since June 25, so how the State government mages the situation here needs to be observed keenly. The medium and small traders here are already a bewildered lot, considering the plethora of goods that will be brought under five taxation slabs. No wonder that pre-GST sales with knockdown prices are being advertised in several parts of the State by traders anxious to clear off present stocks. Insurance companies are meanwhile informing customers through SMS and e-mails of the necessity to clear off premiums now itself, since fincial services will be taxed higher at 18 percent under GST. With many traders still in the dark about the prices of goods and their margins of profit in the coming days, it is clear that markets will be in turmoil for quite some time. Many services too will come under the tax net for the first time. Unless the State government watchdog bodies keep a sharp eye, such a chaotic situation will offer plenty of scope for unscrupulous traders to take advantage. Then there is the question of the notorious check gates in the State. Transporters have already voiced fears that online transit e-way bills will be too complicated for them to handle, what with stipulations like cancellation of such bills due to delay or change of vehicle or failure to cover a minimum distance per day. According to a section of fincial experts, the benefits of GST can be enjoyed only if check gates are dismantled, given the country’s hitherto poor record in transporting goods. But how check gates will fare in Assam remains to be seen, considering the resilience with which check gates have stuck on despite Chief Minister Sarbanda Sonowal’s initial drive.  All central indirect taxes like excise duty, countervailing duty and service tax, along with state levies like value added tax (VAT), entry tax and luxury tax — will be subsumed in GST to help remove all market inefficiencies across India. But a flawed GST may well trigger inflation over the middle term, many observers fear, citing the experiences of several other countries. Assam, along with other States, is getting ready for another test by fire after the currency ban, and it is up to Dispur how it helps mage this painful transition in the State.