A “Complex” Economic Reform

Posted by Danish Irfan
July 1, 2017

With advent of GST in India on July 1st a history of world’s largest economic reform was created. The long overdue efforts of previous NDA government under Atal Bihari Bajpayee have finally paid off and a minutely calculated tax system is born in form of GST-Goods and Service Tax. The path of its journey was a tedious one with government hesitating to reform the whole taxation system of which the citizens had become accustomed to. The need for a tax reform was required as the pressure of excessive documentation and government’s huge tax collection machinery was unable to bring tax evaders under the umbrella of tax. A reform that has shaken up the entire trade and commerce and also impacted the way of government’s revenue is commendably humongous and draconian in nature. Citizens of India have been jolted with the rampant impact of demonetization recently which paved the way to a big filtration of black money from society and now they will have to face GST as the new face of tax master which is not only digital but highly efficient and invasive in nature.

From Consumer’s perspective, GST’s formation has been a hilly ride as the shifting rates of taxes on different goods was to be mandated and also the way this tax was to be taken. The interesting point in GST which clarifies the major burden of taxation is its consumer-oriented nature. Consuming party oof any good or service will be the payer of the tax and hence avoid any mid-chain anomalies in the taxation of good production or transportation. The consumer who until now paid distributed taxes on a variety of goods can now pay a single CGST or SGST on a purchased commodity.

From trader’s perspective, GST is proving to be a hurdle for immensely settled unorganized cash dependent market. Although after demonetization the market have become less dependent on cash but the trade systems in India are less confined to complete tax payment routes instead to lower down the cost of goods supplied to consumer market traders adopted measures and techniques to avoid unnecessary taxation but now all the tax being collected at just one level of trade chain it has become tedious to lower down the goods cost. But the breaches of tax from a vastly spread trade cycle can now be minimised to a great extent and a lot more citizens will be brought under taxation umbrella. As Finance Minister Arun Jaitley said, “I didn’t pay my tax, I will not pay tax, won’t work from now on.” The complete digitization of revenue records makes every penny of revenue accounted and no irregularities or corruption can foster in the gardens of corrupt revenue officials.

The most strategic challenge would be to maintain the state’s share balance and also the measures to recover losses after 5 years of reimbursement period and also the largely populated states like Uttar Pradesh and Madhya Pradesh which earn vast amounts of revenue from state taxes will have to develop strategic taxation measures in order to increase the revenues.

One thing which can clearly be incurred by the revolutionary tax reform is that Indians are now open to bold and drastic measures of change, the future looks bright and promising.