Hurdles cleared, challenge of implementation
The endorsement by the GST Council of two crucial Bills paves the way for the rollout of the Goods and Services Tax regime in the country from this July. On Thursday, the panel headed by Union Minister for Finance Arun Jaitley cleared the State Goods and Services Tax (SGST) and the Union Territory Goods and Services Tax (UTGST) supplementary Bills. Since the acceptance of the two proposed legislations has been done by a council that has representation across party lines, it should be expected that the various State and UT legislatures as well as Parliament will give the final seal of approval without delay. The clearance has come at a time when political tempers have been running in the wake of results of five State Assembly elections, with the Bharatiya Janata Party and the Congress engaged in a war of words on contentious matters. All members of the GST Council need to be complimented for not allowing this distraction to impact their focus. It needs no underlining that the implementation of the GST regime is critical to the country's economic growth and that virtually all parties agree on this aspect. This is one reason why there has been commendable progress since the BJP-led NDA Government headed by Prime Minister Narendra Modi assumed power in May 2014. Barring a couple of exceptions, all States, regardless of the party in power there, have demonstrated exceptional understanding of the need to remove hurdles along the way. The rollout will be a feather in the cap of not just the Modi Government but our policymakers across the nation as well.
The panel has come to an agreement on, among other things, a 15 per cent ceiling on cess to be levied on aerated drinks and luxury cars, which will be over and above the maximum proposed GST rate of 28 per cent. This so-called sin cess will also be applicable in varying measures on pan masala and tobacco products — on the former it will be 135 per cent and on the latter it will be Rs 4,170 per 1,000 sticks or an ad valorem at 290 per cent. This should serve twin purposes. The first is that the high retail costs would hopefully bring down the consumption of tobacco products, and the second is that the cess amount will flow into the kitty of Governments, to be used for a host of social welfare schemes. As for the possibility of a little hike in the price of luxury cars, consumers in this category would be able to bear the extra burden. Of course, such an increase is unlikely to be steep, given that the total of cess and GST will add up to roughly the same as that being charged currently through various taxes.
Now that the GST system is nearly in place and ready to be implemented, those leaders and their parties that had vehemently opposed the new tax regime, must extend their cooperation to the new venture. It is undeniable that a unified tax structure is what the country has needed for a long time. It can cut red-tapism, reduce leakages, enhance revenue collection, and enforce the legal machinery more effectively in case of wrongdoing. The next challenge for the Government is to create a back-office architecture, with the use of technology, to ensure effective implementation. While undoubtedly, work on this must have already begun, hitches, if any have to be addressed in time.