We havea one nation, eight tax rates structure under the proposed Goods and ServicesTax (GST).
The new tax structure looks, as introduced from 1 July:firstly, zero tax rate for essential items that is used by the common man. Thenwe have the 5 percent, 12 percent, 18 percent and 28 percent slabs as decidedin the beginning by the GST council. With additional cess on luxury goods,there is a sixth slab. The seventh slab will be at 0.
25 percent for the roughdiamond and the eighth and final is for gold at 3 percent.Finance Minister Arun Jaitely has time and againexplained the multiple tax structure within GST and the benefit of the same.India with a population of approximately 1.32 billion having economicallydiverse population and each and every state having varying culture andcharacter, having single rated tax would have been disastrous. The richest 1% of Indiansown 58.4% of wealth. The richest 10 % of the Indians own 80.
7 % ofthe wealth. This trend is going in the upward direction every year, which meansthe rich are getting richer and the poor are getting poorer. GSTwith multiple tax rates is to minimize economic distortions in tax design . Ifthere had been the old scheme of single rated tax, that would have been detrimentalfor the poor. The nature of GST after multiple tax rate system can beclassified as proportional in nature rather than being called regressive solely. This reform gives equal footing to the bigenterprises as well as Small and Medium Sized Enterprises(SME) .
The aim of GSTis thus to simplify tax hurdles for the entire economy.As well 29 states haveabolished their check points at their borders , where tax compliance andinspection used to delay deliveries often by days. Travel time has been reducedand as well transportation of illegal goods hasreduced because those businesses cannot provide GST-compliant bills.Advice Chanakya gave about taxation – “that itshould be easy to calculate, convenient to pay, inexpensive to administer andequitable in its burden.
” Current GST structure has attracted criticism fromcertain quarters, as it doesn’t abide by the idea of “one nation , one tax”. Itis believed that having multiple rates defeats the basic purpose of GST that issimplifying the old tax structure.The response of the peopleafter introduction of GST can be summarized in one word and that is PERPLEXED. Thistaxation was not welcomed whole heartedly with people as it demanded them to be equipped with new technologies andprocesses and leave their old practices. Smalltraders and businesses struggled to issue invoices and battled with the newsoftware, with some forced to provide handwritten invoices to customers. Traders,particularly in small towns, are struggling with their lack of knowledge of thenew tax regime — compliance obligations, raising invoices and accessing inputcredits, said Praveen Khandelwal, secretary general of the Confederation of AllIndia Traders. Example: Footwearbelow 500 rupees attracts one rate and above that price attracts a higher taxrate, leaving suppliers confused over which rate they should apply.
Smallmerchants and e-commerce companies are stumbling over confusing array ofdocuments and complicated multiple rate system that determines what percentageof tax will be charged. It has affected negatively the small merchants have stoppedselling on e-commerce sites because they can’t cope up with these new requirements.Small business owners, as well as traders and shopkeepers who have never turnedon a computer, are scrambling to acquire the skills to navigate thesetechnological challenges.”People are finding it tough to understand theGST,” said Pradeep Singal, national president of the All IndiaTransporters Welfare Association. “This has meant that companies hadordered in advance and are still using old stocks,” pushing down transportbusiness by 30 percent.” As quoted in Economic times .