Goods and Services Tax [GST]—Boon or Bane
Tuesday, January 16, 2018
On 15 August 1947, India saw her first midnight parliament session when she transitioned from one realm—the British rule—to another—the Indian Independence. On that night, our then Prime Minister, Shri Jawaharlal Nehru, delivered a speech that marked a new phase of India.
In a strikingly similar fashion, on 30 June 2017, India saw her fourth midnight parliament session when she stands on the verge of yet another transition. Again, our Prime Minister, Shri Narendra Modi delivered a speech that promises a radical change, but in a different aspect. It is then that the Goods and Services Tax (GST) was introduced.
Before delving into whether the GST is a ‘boon’ or a ‘bane,’ it is imperative to understand what it really does. Despite several taxation methods implemented in India in the past, none were as straightforward as the GST. They often involved an array of taxes for different purposes, each with numerous layers and charged by several different authorities.
This immediately poses three problems. Firstly, because of the presence of several authorities and layers, no one person is accountable and hence resolution of issues becomes difficult. Secondly, corruption in such a complicated system is easy for those in power and hard-earned money of the common man falls in the wrong hands. Thirdly, for any common Indian, understanding this system to plan their finances efficiently, was very difficult and exploitation of these vulnerable people was very simple.
Under the mission of “One nation; one tax,” the GST effectively combats these problems. First, the setting up of the GST Council and Anti-Profiteering body by the government enable the common man to report any issues or errors directly to a dedicated system for efficient resolution of issues.
Secondly, the taxation now works directly from the citizen to the government, and is largely handled online which eliminates the need for middlemen for most people who are at least as tech-savvy as being able to open and edit a word file! Even for those who aren’t able to do so, the government has provided its workforce to guide them out. Finally, a simple and structured system is easy to understand and hence, exploitation of vulnerable people will be generally more difficult and will reduce greatly.
Another implication of the GST is the rise in prices of luxury services like cinema tickets, flight tickets, luxury cars, amusement parks, and the like and a decrease in prices of more basic commodities like cab rides, clothing, rice, cereals and the like. It is also important to note that health and education services remain unaffected by the GST. It is immediately clear from this that the government is targeting the benefit of the lower classes and lower middle classes and hence bridge the gap between the rich and poor—something that most governments so far have had little success in doing. I see it as a long term mission to bring every Indian up to at least a middle class standard and then implementing further strategies to shape the now expanded middle class.
As the demographics show, India is expected to have 573 million middle class citizens by 2025, which is roughly a third of its then population. The GST is definitely an incredible step to prepare for such an explosion in the middle class population which will lead to unprecedented changes in the Indian economy.
But again, one cannot please everybody at the same time. There are several Indians who show confidence in the GST and there are several who do not. Amongst endless debates on news channels, viral videos about the GST on social media and pages of articles on the web and newspapers, I think the biggest success that the GST has already achieved is the increased participation of the young generation. For decades, our country has been in the hands of older people, who at times fail to understand that they govern for a country which the largest young population on the planet.
With the coming of the GST, the very same youngsters who once avoided politics, have now started to take interest to understand its working and above all, have started to develop a political and economic opinion. They have realised that India is their own country and that if they feel something about an issue, they need to do something about it than waiting for things to happen themselves. This very idea, in principle, is the essence of a healthy democracy.
If the GST fails or succeeds as a taxation system, only time will tell; but it has, nevertheless, enabled the young generation to become increasingly interested in how they are governed and that, in my opinion, will be the greatest success of the GST.
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