Count down has began for the historic moment to be witness at the central hall of the parliament when on June 30 midnight the GST will be launched. As India awaits the introduction of its GST regime with bated breath, it will be prudent to take a look at the experiences of other countries on the introduction of GST and tackling related challenges.
Given the manifold increase in complexities in India, the government needs to invest adequate resources to ensure that the benefits of GST palpably reach consumers. One is not certain if necessary steps have been taken by the Union government in this regard.
In India, four categories of tax rates have been fixed on Central GST — 5 per cent, 12 per cent, 18 per cent, and 28 per cent. Few basic commodities have been kept under the exempted category. Many products and consumer goods are irrationally classified for an instance– the mutton is in exempt category while the Puja material attracts 18 per cent GST. This gives a wrong message. Consequently, tax rates on goods and services are expected to vary from those existing. There is uncertainty on expected final price of goods and services in the GST era, which expands the possibility of overcharging once the new regime kicks in.
While large traders are offering huge discounts to clear old stocks, such strategy might not be viable for small and medium enterprises. Further, while many businesses have stopped further stocking, the possibility of large amount of stock (taxed under the existing indirect taxation) remaining to be sold just after the implementation of GST, cannot be ruled out, escalating fears of mispricing and overcharging.
Evidence shows that small and medium enterprises have to bear a disproportionately high burden of regulatory compliance. Their compliance burden under GST regime should be eased, especially in instances wherein no tax liability arises. In order to ensure benefits of GST are passed on to consumers, Section 171 of the Central GST Act empowers the Centre to constitute an anti-profiteering authority on the recommendation of the GST Council. It will be important for the government, along with the GST Council, to move swiftly on the constitution of such authority and set in place transparent processes for its officers to take appropriate steps to check overcharging.
They should conduct surprise investigations and checks, without harassment to traders, to become aware of ground realities and the practices adopted. Further, the authority should undertake an in-depth systemic investigation on the causes of overcharging, if any, including operational difficulties faced by traders to claim tax credits. The authority staff should be selected with proper psychometric tests having a positive mindset so that they don't curdle the system and turn off honest traders.
In addition, the anti-profiteering authority must institute user-friendly channels for consumers to register complaints and facilitate their resolution in a time-bound manner. It should accept complaints through multiple channels, both online and offline. A feedback channel with the government must be established to enable the government to take appropriate reforms based on inputs provided by the authority.
Apparently, the existing efforts of the government and business associations on awareness generation and capacity building are targeted to businesses and limited to large cities. This is grossly inadequate. It will be impossible for these agencies to cover the entire spectrum, given the large expanse of the country and related complications involved, such as different threshold limits for exemption from GST for different parts of the country. An alternative strategy of co-opting like-minded non-partisan stakeholders like consumer organisations and civil society groups will be important for maximum reach out, enhancing preparedness and ensuring the success of GST. The sooner the government realises this, better it will be.
