- Congress President Rahul Gandhi has promised to bring a simpler GST during his visit to Dubai
- Launched by the NDA in July 2017, GST was considered as arguably the most path breaking reform for India since independence
- However, complexities in the GST structure have driven several companies out of business and cost lakhs of jobs.
- Even as the GST Council continues to make amendments and rationalise the structure, complexities persist.
- Rather than an asset, the GST could turn into a major liability for the BJP on the campaign trail on current performance
Congress President Rahul Gandhi, who has been constantly training his guns at Modinomics, took issue with the Goods & Services Tax (GST) during his visit to Dubai on Saturday, January 12, 2019. He highlighted that foreign investment was currently at a multi-year low due to demonetisation and a poorly designed GST.
In a press conference, he said that the Congress will take rational economic decisions, restructure the GST and embrace investments from the Middle East and other parts of the world. Rahul also emphasised that his priority would be to create jobs and build confidence in institutions like the Reserve Bank of India.
The GST was regarded as arguably the most path breaking reform since independence, as it replaced over a dozen federal and state levies to unify India’s economy. Indeed large businesses have managed their compliance accordingly and stand to gain from GST implementation. However, the complexities in the tax structure ended up driving thousands of small enterprises out of business, thereby leading to massive job losses and further compounding the problems for the Indian economy post-demonetisation.
A survey by the All India Trade Union Congress (AITUC) in July confirmed that around 20% of India;s 63 million small businesses that contribute 32% to the economy and employ 111 million people suffered a 20% decline in profit and had to lay off lakhs of workers. Centre for Monitoring Indian Economy (CMIE) has estimated that around 11 million jobs were lost in 2018, with rural areas the worst hit. Rahul had earlier coined the full form ‘Gabbar Singh Tax’ for GST, calling it a way to remove money from the pockets of the poor.
The issues in GST can be gauged from the fact that over 200 amendments had been made in the tax structure by September 2018. In the run up to the elections and stung by defeats in five states, the BJP has rushed to make changes to simplify the tax structure.
Finance Minister Mr Arun Jaitley had called the Congress’ suggestion of a standard GST rate a flawed idea earlier, but now the government has moved towards rationalisation and also greatly reduced the number of items in the highest tax bracket. For instance, products like TV screens, movie tickets and power banks have been removed from the highest tax slab. Mr Jaitley also said that the GST is now moving towards a single standard rate of 12-18%.
Measures like these by the government are a case of ‘too little too late’. Moreover, even as they bring on new amendments, the complexities still persist. Consider for example the recent hike in limit for GST registration from Rs 20 lakh to Rs 40 lakh. It is only for goods and not services, and is not applicable when you are involved in interstate sales. Moreover, those registered under section 24 will have to continue with their registration. It is not clear whether it will be applicable if someone is in the business of goods and also has a small services income.
The GST was expected to be one of the most landmark reforms for the present government, but as Rahul Gandhi rightly points out, it has proved to be a liability for BJP on the campaign trail. They can best market GST on the basis of future promise, because it will be counter-productive to pitch the GST on the basis of present performance.