<b>Letters:</b> Getting GST-ready

With reference to “A big step forward” (June 5), in its concluding observations in 2016, the committee headed by Chief Economic Adviser Arvind Subramanian on possible tax rates under the goods and services tax (GST) described the tax as a game-changing reform that would facilitate “Make in India by Making One India”. The GST is undoubtedly a landmark legislation that can potentially transform the Indian tax structure by subsuming all indirect taxes and unifying the country as a single market. It can not only help improve governance and strengthen tax institutions but also impart buoyancy to the tax base. The government must be lauded for doing a creditable job in removing systemic bottlenecks and addressing the issue of fiscal autonomy of states.

However, the tax rates arrived at by the GST Council are higher than the current service tax rates for certain goods and services. This would lead to an increase in cash outflow and constrain liquidity in the business. Also in new tax regime, credit of input tax will be available on the basis of matching concept, if there is mismatch of details as provided by the supplier/vendor vis-à-vis that provided by recipient, then input tax credit would be disallowed and the latter might have to pay tax (equal to input tax credit) along with interest. There might also be an increase in the compliance cost due to decentralised registrations which shall adversely affect the working capital needs of small businesses.

Further, the GST Council is yet to provide clarification on certain place of supply and time of supply rules and the anti-profiteering framework which might further affect the ease of doing business in India. The impact of GST cannot be realised unless a robust communication and logistics infrastructure is in place. It is time the government reassessed its preparedness for its transition to what is arguably the most significant tax reform since Independence than merely stick to the July 1 deadline which might result in an administrative nightmare.
 

Shreyans Jain   New Delhi

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