Unfinished business

Mohan R Lavi | Updated on January 17, 2018


The Model GST law needs more substance

When the Constitution (122nd Amendment) Bill was passed by the Rajya Sabha last week, it paved the way for the law relating to Goods and Service Tax ( GST) to be introduced in the country. Without doubt, this is a significant achievement considering the quixotic fact that the party that opposed GST some years ago is pushing for the tax making its arangetram in India. Besides, the party that introduced the tax in 2006 was opposing it till recently as their version of GST was not being introduced.

Stranger things have happened in Lutyens’ Delhi. However, judging by some reactions to the passage of the Bill, one would have thought that GST is up and running. A section of the media went to the extent of elaborating on how various sectors of the economy would be impacted when GST is introduced. This impact analysis has been done despite the fact that the rate of tax under GST is still anyone’s guess, and the grey areas in input tax credit are yet to be fixed.

More to come

As the saying goes, “this is only a trailer; the movie is yet to begin”. While the removal of the 1 per cent “Help GST” tax to assist manufacturing States is good news; the very fact that such a levy, that goes against all qualities that an ideal GST should possess, was even thought of is a cause for concern. It leaves one with the impression that the Government could resort to such levies whenever the going gets tough in terms of tax collections.

There have always been two aspects to the introduction of GST in India — the political and the administrative aspect. The Government should capitalise on the momentum created by the passage of the Constitution Amendment Bill. Now that the political part of GST has been done and dusted (hopefully), the focus now should be exclusively on the administrative issues.

Numerous provisions in the Model GST law need to be completely rewritten. The benefits of GST will trickle down only of there is a seamless and across-the-board availability of input tax credit.

The Model GST law has conveniently replicated most of the present restrictions on availing input tax credit, and rubbed salt into the wounds of the tax payer by adding a few more such as paying taxes and filing returns.

Implementation team

A “GST Implementation Team” needs to be formed quickly which will comprise representatives from industry and commerce and should not have any political representation.

The team needs to look at the Model GST Law with a fresh set of eyes and suggest necessary changes. It is this law that should be discussed later by those who matter.

Pushing through the present law just for the purpose of introducing GST would only make GST a cosmetic makeover of the present laws than the game changer it is supposed to be.

Interestingly, there are some similarities between the proposed GST and Tamil blockbuster film Kabali. Like them, GST also saw expectations run sky-high well before its release.

Though the response to the movie has been lukewarm, fans of Rajnikanth hope his next movie will not disappoint, much like advocates of GST hoping that the next version of the model GST law removes all the inconsistencies in the present one. As always, we live in hope.

The writer is a chartered accountant

Published on August 16, 2016

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