By Kunal Basu:
There has been much hype over the much-awaited 2016 GST Bill. Many people seem to be of the idea that it would be a problem rather than a solution. But I believe the truth is that the GST Bill would, if ratified and implemented successfully by the States and Centre, actually resolve a lot of problems and social issues faced by our economy.
GST’s intentions bears a lot of similarity to OROP. If the latter seeks to implement standard pensionary plans for all military personnel irrespective of rank or status, the former seeks to consolidate both direct and indirect taxes into one single law. This would not only reduce charging complexities commonly found in multiplicity of tax legislations, but it will also tax assessees only once, as opposed to double taxes indirectly warranted under both Lists 1 and 2 of Schedule VII of our Constitution.
As per Section 23 of the proposed Bill, the tax assessee would be supplied an invoice at the point of sales only. Not only does this statutory measure promote financial accountability, but it will helps curb tax evasion to a large extent.
The presence of Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) heads would ease out an assessee’s dilemma of depositing monies collected under relevant heads. GST would also remove the problems relating to multiple chargeability of tax under specific heads of income (Section 14 of the Income Tax Act). Currently an assessee may be charged under income accruing from house property (if they lease it out to a third-party) and/or income from profits, gains or business (if they use it for personal purposes). GST would charge them only once and no further.
In the retail sector, imposition of tax still subsists at varied stages of manufacture of goods and services. Service tax is constantly levied from the point of procurement to the point of final sales. As a result, a purchaser often has to pay a lump sum amount of money to avail retail services.
Additionally, retail manufacturers often have to deal with losses arising out of unnecessary parts. Implementation of GST in this sector would consolidate imposition of service and sales tax amongst others, and levy tax only once at the final sale point. This would benefit both the purchaser and the sellers.
GST would also benefit the military sector. Not only are there high costs involved in the procurement of raw materials in making of armaments, but a lot of economic logistical losses are suffered by the manufacturers by unnecessarily disposing spare unused parts. GST would help this sector by levying tax only once at the point of consumption and no further.
In the pharmaceutical sector, currently there are various medicines that are designed for the same remedial purposes. Advil, Tylenol and Crocin are all used to treat high fever, albeit with varying costs. Similarly Roxid-500 and expectorants like Mucinex are both used to treat nasal and chest congestions. Service tax on these medicines might operate to the disadvantages of the purchaser vis-a-vis differential cost prices. GST would only consolidate medicines with similar treatment functions into one single class and will apply tax at only the point of sale/consumption.
In the housing sector, the presence of GST in place of service tax would facilitate real estate projects. Tax is levied currently at all stages of construction; whether procurement of raw materials or otherwise. It would also help curb illegal money laundering and hawala transactions in this sector by having the purchaser insist on a mandatory invoice at point of purchase of the property.
To conclude, the GST Bill would, if implemented successfully, help the Indian economy considerably. Not only would it facilitate the economic interests of the people, but it would also promote financial accountability by curbing black marketeering and the steady inflow of illegal cash.