On a sultry Monday evening, students filed into the Central Lecture Theater, eager to hear and share opinions on the month-old Goods and Services Tax. The panel discussion, titled GST: Prospects and Problems featured four panelists. The first panelist was Prof. TN Srinivasan, a veteran in the field of economics and Distinguished Faculty at the Department of Humanities and Social Sciences, IIT Madras. The second panelist was Mr. M Balaji, Joint Commissioner (LTU), Commercial Taxes, Chennai. Mr. Piyush Kumar, the third panelist, is presently pursuing his final-year of Masters in Development Studies at the department. The last panelist was Prof. Suresh Babu M, an Associate Professor at the department.
Prof. TN Srinivasan set the ball rolling by fondly remembering the contributions of his former student at the Indian Statistical Institute, Aseem Dasgupta, to the drafting of the GST. Mr. Dasgupta, the then-West Bengal Finance Minister, was the Chairman of the Empowered Committee for GST. According to Prof. Srinivasan, much of the work for GST had already been done, even before the present government had been sworn into power. Only questions of sovereignty and dispute settlements between centre and state were contested which this government has resolved. A mechanism for compensating possible loss of revenues for states from indirect taxes has been worked out for 5 years. The gains of GST are obvious, he said, as the taxation process has been highly simplified. Earlier, each town used to have its own taxes. However, because of GST, the market size is likely to expand. With the exception of the compensation mechanism, Prof. Srinivasan felt that the GST was a positive move.
Mr. M Balaji then gave a wide-ranging talk on the history of GST and its features. He started off by saying that such a tax was first introduced in France in 1948 and that nearly 165 countries have adopted it so far. Then he gave a history of the tax in India. The idea was first floated by the previous NDA government. The subsequent UPA governments carried it forward and the process was completed a year ago by the present government. After that, he briefly explained how indirect taxation in India operated earlier and how gradual changes came into effect, culminating in the GST. He explained how the earlier tax regime was highly distorted and how the introduction of GST would help streamline the whole process. Also, the move will help widen the tax base by a further 50 lakh (the current figure is around 80 lakhs). Though across the world economies have seen a dip in growth for a couple of quarters after GST was introduced, they gradually picked up over time, and saw huge benefits in the long term. He was appreciative of the anti-profiteering clause in the Indian version. While in other countries the benefits of the tax weren’t passed on to consumers, in the Indian setup, dealers will see their registrations cancelled if they don’t pass the benefits on.
The next panelist, Piyush Kumar, gave a detailed history of indirect taxation in India. One interesting piece of information was that the problem of too many indirect taxes was recognized as early as during the Constituent Assembly debates. However, the first serious reform started with the 1976 LK Jha Committee on Tax Reforms. Over the years, there were incremental changes which finally led to the Value Added Tax (VAT), the precursor of the GST. There were multiple deadlines for the GST (one in 2010, another in 2011) which were missed, as some states resisted provisions in the tax. Finally, a consensus was achieved and the 115th Amendment Bill was passed in 2016. It remains to be seen whether the tax would impact small-scale industries. He concluded by stating that India has survived as a political union for 70 years and it has now become an economic union as well.
The final panelist, Prof Suresh Babu, offered a look into the nuts and bolts of GST in systematic fashion. The GST is a destination-based consumption tax. In other words, it is a Value Added Tax (VAT). The tax ensures seamless credit across the entire supply chain, as it subsumes many indirect taxes. Prof. Suresh Babu felt that the hallmark of the current GST is the IGST (Inter-State GST), which acts as a conduit for inter-state taxes, with the centre acting as the arbitrator. This helps in the development of a common national market. Not only has the GST hugely simplified the tax regime, it has also brought about conceptual clarity regarding goods and services. Further, compensation for states should not be a huge problem, as very few states (for instance, Maharashtra and Gujarat) are expected to require compensation from the centre. However, there exist some concerns, including fixing a Revenue Neutral Rate (RNR), a tax rate which will give the centre and states the same revenue as before. In addition to this, the revenue subsumed under GST amounts to less than 46% of states’ revenue. Alcohol and petrol can still be taxed separately. Prof. Suresh Babu concluded by saying that while these anxieties continue to exist, they should not become cause for worry.
The session concluded with a question-answer session, where the panelists took questions on issues surrounding the feasibility and implementation of the act.
Correspondents: Ranjani Srinivasan and Avinaash R
Photography: Parthiv S Kidangoor and Olivia Joshi