NEW GST RATES

Ramgarh is a small village; the villagers here somehow manage to deal with poverty, inflation etc.

Many are into farming, few in the business of transportation.

One of the residents, Basanti rides horse cart for living.

Basically, life is not easy.

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Life gives them lemons too often, and they usually blame that upon Nehru. How else can they cope with the harsh reality anyway?

Then a new figure enters Ramgarh 5 years ago, Gabbar he is called.

Gabbar demands 3 times the tax.

Now, you may ask, “why is Sholay mixed with Lagaan?”

Actually, Bhuvan from the movie Lagaan defeated the British at their own game and forced them to leave the country, but Captain Russel left here a legacy of ‘sorry’, ‘thanks’ and ‘lagaan’ (tax) in the system. People in Ramgarh have questioned Gabbar over implementation of GST. Seems like tax rate is random, some items at 12%, others taxed at 18%, then 24% etc. Too much complication in compliance.

Still, GST is a requirement – could be implemented better. But Gabbar said, “I’m sorry but this is the kanoon (law).”

Now, who can dare speak against Gabbar? Thakur also couldn’t do much, except scream in vain.

It may be hard but the public coped with GST for years. Some defended GST, saying: The intention is good. Many small businesses closed. And the pandemic made it worse. Yet, the tax remained. Gabbar got what he wanted, while people suffered. But Gabbar wanted more. He returned and again demanded for more tax. People were like, “How much more? The condition of the village hasn’t even changed much; there’s no sign of Smart Ramgarh anywhere to be seen.”

Gabbar had a list; he read from it: Roasted and salted peanuts 12% GST and more items to be taxed. With that Gabbar announced 5% GST from 0% GST on daily use food like rice, wheat, flour, curd, lassi, puffed rice. Printing, writing, drawing ink, knife, pencil, sharpener, cake server taxed at 18% (previously 12%). Tetra packs (for beverages, fruit juices, etc.) will now be taxed from 12% to 18%. Cheap, less than Rs1000, hotel room will attract 12% tax now (0% earlier). Not just hotels, hospital room previously taxed 0%, now also will be taxed.

But this is only one side of the story. Not only small items, tax on expensive finished product diamond increased slightly from 0.25% (earlier) to 1.5% (now). Tax on cable car reduced from 18% to 5%. What a masterstroke!

Surprisingly, some people are still happy, or pretending out of fear!

Still, Indian Medical Association urged FM Nirmala Sitharaman to grant GST exemption to bio medical waste treatment facilities. If tax will be imposed on hospital rooms, healthcare will become more expensive.

Confederation of All India Traders have declared nationwide agitation from Bhopal on 26^th July and their demand to make GST rules easy. The traders body stated that bringing unbranded food and other products under the GST tax would increase the compliance burden on the traders. This is not good for ease of doing business. But who will listen to this body of traders? They must have also supported Gabbar before.

Actually, GST was implemented 5 years ago, the move was celebrated as masterstroke by everyone and promoted as financial independence. Economists thought GST regime would boost GDP by 2%. 5 years later, we are still deciding GST rates on various products. It was supposed to be a simple tax structure, but has become convoluted and complicated.

For example, Pizzaat restaurant (dine in) would attract 5% GST, but delivered would be taxed 18%. GST on toppings is 18%. Some Pizza companies sell cheese as toppings too, cheese otherwise a processed food – 12%, but as topping 18%. Same with milk and lassi, flavoured milk is taxed at 12%. Tax on round roti is 5%, but on triangular Parantha is 18%. Too much confusion!

For common man and businessman both, the GST is not easy. The tax is so complicated that it is a necessity to hire tax consultant. It has had an adverse impact on MSMEs as GST added additional operational costs to these sectors. It is an uphill task for majority of MSMEs to maintain IT solutions. Big businesses have all the resources to handle those complications. How will small business claim input tax credit refund when it’s so difficult?

Today, because of these complications, no one calls GST a masterstroke. Nobody is saying it is a major success. Yet, everyone agrees that the idea of GST was good. Uniform tax system was required since decades. Introducing GST was a great masterstroke but execution of it not so much. GST was forced on people.

Positives of GST

Increase in GST collection – Good news is that tax collection has increased.
Hassle-free inter-state movement – Inter-state movement of goods is now easier,
Nabbing tax evaders – One can’t evade the tax because of compliances.

If GST has to be truly successful, then it has to made simpler. A new GST 2.0 with positive changes can be introduced, but will Government do it?

Because of GST, relations between centre and states have deteriorated. On many occasions, centre has not been able to give states their share of GST in time. (Centre has to give GST compensation to states for 5 years). States have to rely on centre to get their part of GST. At least 12 states say to continue GST compensation. GST has not boosted states’ collections as per Indian ratings on Economic Times. How will centre give compensation to states?

Since GST collection was not as high as expected, so everyday items, from small to large, are brought under GST. Where GST was supposed to be a unified system, but the rates are still being toyed with.

But the biggest hurdle here is that there are so many compliances to stop tax evasion, that following those compliances has become business and industry of its own. Chartered Accountants are pleased and highly benefited by it, but businesses not so much. GST has complicated the ease of doing business which is not good in the long run.

What is it next?

Will the fear of Gabbar stop people from asking questions? Where are Jai and Veeru to save the people from the tax? Can’t find them as of yet…

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