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Myths about Tax Revenues

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  5 July 2017 12:00 AM GMT

There are quite a few things that are not quite in order about Assam’s expected tax revenues. Now that there is a marked departure from the earlier tax regime on goods and services that were an unfathomable cocktail of Central and State taxes, there should have been greater support for the recently implemented GST. But given the typical suspicion about all government initiatives, it is hardly surprising that the GST should be taken with the proverbial grain of salt. However, buoyed up by all the hype surrounding the GST, Assam’s Fince Minister Himanta Biswa Sarma has ventured to make a few predictions about how the complexion of the State’s economy is likely to be in the coming months. One is that people will not have to pay more for goods and services than they had been doing. According to him, leakages will be stopped, and industrialization will get a push because manufacturers will not confine themselves to particular States due to the uniformity in taxes throughout the country. He believes that they will try to set up industrial units across the country in order to cut down transportation costs. What the Minister has probably overlooked is the fact that the location of industrial undertakings is generally guided more by the presence or absence of the requisite skills for the industry and a general culture of industrial activity promoted by decades of actual work related to certain industries. These are factors that are generally deemed to be far more vital than concessions in taxes and duties that State governments offer to entrepreneurs in the hope of attracting them their States. Sarma is optimistic that tax collection in Assam that is around Rs 6,000 crore a year will double in about five years to Rs 12,000 crore. He has possibly overlooked the fact that tax evasion is a favourite game with most industrialists, and that now with just one tax to handle, their task will be much easier than it had been when they had to juggle with quite a few taxes.

Himanta Biswa Sarma has said that sales tax gates will be abolished in about two months as soon as the e-way billing system is in place for ensuring seamless movement of goods. He added that flying squads will be deployed to conduct mobile checking. This is the kind of administrative change that needs to be expedited so that industrialists and transporters of goods do not get the additiol valuable time to consolidate their methods of increasing profits through under-invoicing of goods. The minister will also do well to distance himself from certain myths about the benefits of GST that are gaining currency through aggressive publicity. One is that the GST will bring down prices of all essential commodities and thereby benefit the poorer sections of society. This has not happened and it is unlikely to happen in the near future. Had the government been truly concerned about the impact of the GST on the poorer sections of society, it would have ensured that the prices of medicines and appliances of health-care were reduced. This has not happened. In fact, the prices of some medicines and health care needs have increased substantially. If the GST has really benefited anyone through reduction in prices, it is the wealthier sections of society like builders. The prices of cars have come down substantially (even to the extent of one or two lakhs of rupees) along with the price of cement. Will the builders pass on the benefit of lower cement prices to their customers? The vastly lowered prices of cars would indicate that the government has shown greater concern for the upper classes rather than the middle class and the poorer sections of society. The people expect the requisite course correction in the GST exercise so that such impressions are expeditiously dispelled.

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