DNA Edit: GST remains a knot

Getting the GST tax regime underway was one of the most ambitious projects of the BJP government, and it was only the finest of political management and acumen that ensured the otherwise languishing bill saw the light of day. It has been nearly four months since it became a feature of India’s tax edifice, and the feedback from small and medium traders hasn’t been optimistic.

Naturally, in the run up to the Gujarat Assembly elections, angry poll pitches blaming the government for a sub-par implementation of GST are coming to the fore. Some of this criticism is justified, but a large part of it is malicious and partisanal. Many of the problems and bugbears that are seen to be a part of the GST edifice can be remedied in the space of two quarters. Further, signals from the government that it is sensitive to the needs and feedback of traders have been abundant. Earlier this month, Finance Minister Arun Jaitley did hint that there, indeed, is scope for reduction of tax slabs within GST. Even Revenue Secretary Hasmukh Adhia has reportedly said that a complete overhaul of tax rates is the need of the hour to reduce the compliance burden on traders.

Adhia also said that GST will take at least a year to stabilise. Unfortunately, traders cannot grant the government the luxury of a year to sort out GST’s teething problems. Saddled with filing numerous returns, they find themselves at the short end of the stick. The longer the business community is kept waiting, the larger the damage to BJP’s standing within the small business-class community. It was this class of traders and businessmen that was, in a substantial part, responsible for giving BJP its rousing victory in 2014. It can ill-afford to ignore or sideline its concerns. It is rather unacceptable that even after four months, the IT infrastructure of GST has not found its feet.

Further, credit claims raised by traders are eating into the government’s GST revenue kitty by a margin much higher than it anticipated. This has had the ripple effect of leaving state governments worried sick about the adequacy of revenue collections. Many in the state administration are reworking government budgets as cumulative revenue collections have taken a toll. However, the situation can still be prevented from spiralling out of control, towards which the government has been working diligently, albeit slowly. There are some promising green shoots as well. For instance, in September, over six lakh traders filed their returns under GST, taking the total number of tax payers up to 44 lakh and helping the government earn more than Rs 2,500 crore in taxes. Currently, 11 lakh firms are still to complete their registration.

Meanwhile, there is another critical issue within the GST framework that must be tackled. GST has had the inadvertent effect of forcing smaller firms into its net, not because it has delivered on its promise of making the process of tax filing easy, but for the sole reason that they could be forced out by bigger players in the market. GST’s interface should be simplified, and soon, lest the anger take a toll on BJP’s electoral prospects.