I should first put in the caveat that I am philosophically opposed to a GST. I object to the centralization inherent in it. When you create a common market, you take away the powers of states and municipalities to compete with each other for industry by offering various incentives. Competition makes things better. Anything that discourages competition is a bad idea.
That’s my opinion. I am very much a fan of the deep seated American style federal system. I would prefer empowered local governments, even putting police under the control of the city mayor rather than the state government.
That said, I understand that most developed countries with the exception of the United States have some form of GST or the other. And I can see the argument in the Indian context : a large amount of corruption happens at the local government level. Trucks lined up outside every city almost always have to pay a bribe. And local governments are often under the thumb of powerful local interests. When you take away the powers of local bodies, you cut off corruption at its source. A powerful builder whose writ runs in Hyderabad would not be able to force the hand of the Central Government in Delhi.
Not to mention that the local governments are often most chaotic and disorganized, making it impossible for people or businesses to understand their rules. Just ask my 71 year old father, who is currently running helter skelter around Kolkata Municipal Corporation. Apparently, some rules changed last year and we need to pay a small sum of money … but we can’t do it because the municipality employee in charge has gone to visit his distant uncle or something and nothing will get done until he decides to come back from his vacation 🙂
This is exactly the kind of experience that can be avoided if stuff can be done online, as with GST.
So, I am not rigid about the ideology. I see the benefits of the new rules and how it would make the informal sector move towards the formal.
All my life, I have heard that we are a poor country and so much of our economy, businesses and jobs are in the “informal” sector.
Well, this had to change some day. This situation cannot last forever.
And that day might as well be today. In 2017. If not now, how much longer are we going to wait? The transition needs to be made.
And GST is that transition. The system has now been set up to reward the formal sector over the informal. If you register with GSTN, you can get the crucial “input tax credits”. The government will give you back all the tax you paid on the purchase of raw materials for your business. This allows you to lower your prices, making your business more competitive. Anyone deliberately trying to stay under the radar by not registering with GSTN will now have to set his prices higher.
Naturally this means that customers will move to the one who registers with the government and declares his business income honestly.
The system is finally rewarding legal behavior. Good.
It is quite funny that the Congress party seemed like a grumpy five year old yesterday. In case they have forgotten, it was the Congress that initially set April 1, 2010 as the deadline for the implementation of GST.
In 2006, the Congress predicted that India would be ready 2010 🙂
If traders were ready back in 2010, how could India possibly not be ready now in 2017? How badly did Manmohan Singh run the country during UPA that there was such active backsliding in these years? LOL!
Not to mention that CPI(M)’s Asim Dasgupta was the head of the GST committee appointed by Atal Behari Vajpayee in 2000. He headed the committee for 11 years. What was CPI(M) doing all those years? Today we are not “ready”?
We understand of course the politics involved. If “honest” Manmohan had got the chance to unveil GST, it would have been known as the cherished dream of Rajiv Gandhi. Because Modi is doing it, GST is now a blot on the nation.
There is a flip side to this obviously. As Gujarat CM, Modi had been very proactive in opposing GST (along with Congress’ Prithviraj Chavan, then CM of Maharashtra). And now the same Modi throws a huge party to claim the credit for implementing GST.
Well, the answer to that is simple : Dear Congress, we won and you lost.
The BJP successfully resisted GST because it had several powerful state governments and over 100 Lok Sabha MPs. If the Congress had today what BJP had in 2010, it would have similarly stalled Modi. But Modi-Shah team ground the Congress down to 44 and then squeezed it out of power in state after state.
Result, the failed Congress was browbeaten to surrender before Modi and hand him all the credit for GST.
It’s called politics. And realpolitik is harsh. It is not a carebears’ tea party. The BJP has seized the legacy of GST and the BJP will own it forever.