GST is here: After 11 years of wait, midnight tryst with tax reform

Council lowers rate on fertilisers to 5%; Mamata cries 'inspector raj'

After a gestation period of 11 years, the biggest tax reform in independent India, the goods and services tax (GST), finally became a reality on Friday midnight. The GST replaces 17 different central and state taxes, including services tax, value-added tax, octroi, duties and other charges, except Customs levy.

All goods and services have been slotted under six tax rates: 0 per cent, 3 per cent (for bullion), 5 per cent, 12 per cent, 18 per cent, and 28 per cent. There is also a cess, over and above the highest rate, for some goods.

Hours before the new indirect tax regime was rolled out, the GST Council on Friday lowered the rate on fertilisers to 5 per cent from 12 per cent.

“The GST will make India a common market, with common tax rates and procedures, and remove economic barriers. For a majority of goods, the tax rate approved by the GST Council is much lower than the current combined indirect tax rates levied by the Centre and states,” said an official finance ministry statement, ahead of the launch.

The modalities and details were decided upon by the GST Council, headed by Finance Minister Arun Jaitley and comprising finance ministers and representatives of all the states.

There were five pieces of legislation: The Constitution Amendment to GST, passed by the Lok Sabha and the Rajya Sabha, the Central GST Act, the Integrated GST Act, the Union Territories GST Act, which were all passed by the Lok Sabha in the last Budget session, and the State GST Act, passed by state legislatures, except Jammu and Kashmir.

“Since its formation in September 2016, the GST Council has had 18 meetings. It was a mammoth task involving nearly 30,000 man hours of intensive work. More than 200 meetings of the officers of the Centre and the states took place in different parts of the country to expedite the implementation of the GST,” the statement said. The Council held another meeting on Friday, meant to be celebratory.

But even amid the celebrations leading to the midnight roll-out, there have been voices of dissent from the Opposition, and different interest groups.

Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee, one of the leaders of the Opposition that decided to stay away from the ceremony in Parliament, said on Friday, that the dreaded “inspector raj” was back.

“At the stroke of midnight on August 14, 1947, India won her freedom. Now, at the midnight of June 30, 2017, freedom and democracy stand to face grave danger,” she said in a Facebook post. Her government has been deeply critical of the Centre and different provisions of the GST laws.

Not only the Opposition, there are a few critical voices within official circles.

NITI Aayog member Bibek Debroy said any suggestion that the GST will boost gross domestic product (GDP) growth by 1-1.5 per cent was “utter rubbish”. “When you see figures floating around, there will be 1-1.5 per cent increase in GDP after implementation of the GST… For God’s sake, that is utter rubbish,” Debroy said.

He was, however, quick to add that he was not really contradicting FM Jaitley and Revenue Secretary Hasmukh Adhia, when it was pointed out to him that they, too, had been proposing such a boost to the GST.

Traders, who have been protesting various provisions of the GST laws, also escalated their agitation, observing a daylong Bharat Bandh on Friday.

Jaitley has acknowledged the massive challenges the government will face during the initial phase of the implementation. The Centre has stepped up its outreach programme through various events, workshops, media and television.

Field formations of the Central Board of Excise and Customs (CBEC) at all levels have been activated to interact with businesses and industry bodies. The CBEC has set up a war room, which will be open from 8 am to 10 pm, to address queries.

Staffed with 10 officials, it will handle queries from various departments of the states and the Centre, and direct them to the department concerned. A team has also been set up to coordinate with the Prime Minister’s Office (PMO), which will closely monitor the roll-out.

The GST Network (GSTN), the information technology (IT) backbone of the new indirect tax, is also up and running. Taxpayers will submit their registration applications, file returns, make payments, and claim refunds on it.

“The GSTN has been provided with a robust IT platform and it will provide interface to 8 million taxpayers and thousands of tax officials; 64,000 officials have been trained on the GST portal since February. The GSTN systems have undergone load tests, performance tests, vulnerability tests, security and all other mandatory tests,” the statement from finance ministry said, adding that more than 6.6 million taxpayers have activated their account at the GST portal.