GST: CONFUSED TAX REGIME OF A CONFUSED GOVERNMENT

 Hey, how you guys are doing? So, it is time, that I start sharing my views on current political, economic and social issues and how do I see them. 

So, recently, GST council met for the 55th time and they decided some things and deterred some as well. And it caught some attention not only in the public discourse, where GST always somehow finds an attention, but also in the meme world. People, especially, those who do not suffer because of GST think that it is a funny tax regime. This cultural shift in the perception of a tax is very well engaged by the present dispensation, where Nirmala Sitaraman, our present honorable Finance minister, is seen joking about eating and cooking stuff and so on. When this kind of Obscenity of those in power is taken by the masses as humor, we are doomed. Let us see it in an organized way, what is GST? And what are its issues and how is it different from other taxes. The end goal of this Blog should be, someone who reads it end to end, becomes aware of all the basics and intricacies of GST as a tax regime. 

So, when we think about Taxes, the most commonly understood tax is Income tax. Income tax is simple, isn't it? It is a kind of direct tax. Direct as in, if your income comes in the income slab of the Income tax, Tax of some percentage will be payable by you to the Government. However annoying taxes sound, they are necessary for running the country if we still consider India a welfare state. 

Income Tax remains efficient because it literally takes money from the pockets of the rich and if government uses it judiciously, we can definitely build basic amenities for poor, like Education, health, infrastructure for all and so on. 

GST is a kind of Indirect Tax. Indirect as in, it is not directly charged on your income or income slabs, rather whenever you purchase a product (goods) or say, go in a restaurant (Services), along with the cost of the product itself, some percentage of the cost is already added in the cost of the product, and it is deducted. 

Now, you must have understood where GST stands as compared to Income tax. If we talk about Taxes, what is the basic need regarding taxes?  In my opinion, there are two:

1. It should facilitate wealth redistribution. 

2. More people should pay it for it to be effective. 

If we compare the two taxes, on the second front, GST is more efficient since, Everyone, regardless of their income brackets, pay GST. Even the child on the streets who sleep on the streets and beg and then buys a bread from a Chai tapri, even he pays GST to the Government. So, in this regard, GST is much "Comprehensive". 

On the first front, it is very dicey. GST was supposed to be revenue collecting and why else would a government want more revenues ideally? to help their people? right? No, maybe we are wrong here. According to the Oxfam report, 2023, Over 2/3rd of the total GST collected by the government is given by the non-rich, the poor and the lower middle classes while the rich, the top tier only contributes 3% in the GST revenue. Is it facilitating Wealth re-distribution? I guess not. 

When the Government decides to tax sweet popcorn or salty popcorn and one less and the other more, it seems a funny business. But it really is not. The reason Government gives you is Health. If a government starts justifying taxation on the very fronts for which Taxation has become ineffective, what can we debate the government on? Like, If we are talking about Health, look around you! What healthcare facilities do you see? Has the government taken any valuable steps to improve the healthcare structure and functioning of this country? You might say, the 5 Lakh health insurance given to the old. Ok, I concur, it is good. But the problem of healthcare cannot just get solved by the surface level changes like this. If an old person goes for treatment in the government facilities, ok, you covered the expenses, but the amenities available for treatment should be, first of all, of a decent quality to even save the patient in case of an emergency, right? What good is an insurance of health, if the patient dies, because of poor services at a government hospital? Structural and functional changes are required in the health care sector. 

Coming to GST again, the way to look at the current decisions can be two-fold. One is to accept the reasoning the present dispensation is giving. Second is what I have tried to elucidate here. 

Do not get me wrong. There are some great benefits that are in the inherent nature of GST, like:

1. Enhanced revenue collection

2. Expansion of Tax net

3. Reduced interference with tax officials as intermediaries. 

4. Reduction of turnaround time: Turnaround time is the time that goods take from the manufacturers to reach the market. Actually, GST was a collection of all the previous small taxes, like tolls at check posts etc. so, within GST, they are covered, so no need to waste time for the manufacturer at check posts, tolls etc. 

5. Rate Rationalization: various sectors had irrational price slabs and due to the additional GST, they have shifted those slabs to more reasonable prices. Specially in Automobiles it is seen. 

And there are issues of course:

1. Multiple Tax rates and that too arbitrary. 

2. New cesses crop up.

3. Complex tax regimes

4. Nearly, half of the critical sectors of Indian economy remain outside the purview of GST

5. Loss in the fiscal autonomy of states. 

Overall, if we want a smooth, functional and effective GST accumulation, I suggest following ways:

1. Expansion of Tax base: include more critical sectors in GST regime. 

2. Bring Tax predictability: This will mean no mid-year cesses by the Centre. 

3. More accommodative to the State's needs. 

4. Remove exceptions in products

5. Reduce irrational increases in certain products.

6. Perception management about the Tax. 

7. Other 5-6 points like Grievance redressal, Training officials, reduce friction and some other generic points but mainly these. 

To revive GST regime back for the Indian Economy, India needs to take some radical steps such as the extension of revenue guarantee to states, restricting cesses, above all, respecting the fiscal autonomy of states. Overall, GST is not bad. In fact, it is a positive step towards shifting Indian economy from an informal to an informal one. But with these caveats in mind and action, we can make this more efficient. 

So, this was an attempt to write on some economic matters concerning with the country. Tell me if you like it. I can continue more. It helps in my preparation as well. Both in forming and expressing my opinion and revising what I have read for Civils. You can comment whether you liked it.