GST: folly realised, now fix it

GST: folly realised, now fix it

Union Revenue Secretary Hasmukh Adhia has said that the recently introduced Goods and Services Tax (GST), including its rate structure, needs “complete overhauling”. This is as close as the country’s top bureaucrat in the Finance ministry can get to admitting that the Modi government has made a mess of the tax reform. When the Congress forewarned the government even before GST was rolled out, Finance Minister Arun Jaitley called it “obstructionist”. More recently, criticism of the government’s handling of it by former finance minister Yashwant Sinha and other BJP leaders were disdainfully dubbed fulminations of frustrated job-seekers. The sudden change of tack betrays a sense of panic and urgency at the highest levels to respond to the business community’s anger over the shoddy planning and implementation of GST. The impending assembly elections in Gujarat, where the reaction to GST has been intensely negative, seems to have alarmed the government.

The realisation of folly is welcome. Ever since its launch on July 1, the government seemed to have tied itself up in knots over GST. It was supposed to replace a multi-layered and complicated tax system with one simple tax. Instead, the government hurriedly rolled out an even more complicated system of tax rates and reporting requirements. The series of U-turns, tweaks and contradictory statements led to confusion worse confounded. The most avoidable glitches related to the IT infrastructure, and these continue to persist. Nearly four months since its roll out, GST has become a nightmare for small and medium traders. The government’s attempts to dismiss their concerns as teething problems can no longer hold. It is clear that rules and rates need to be tweaked to get the economy back on rails. GST should have been a game-changer. If it is now being seen as an instrument of harassment, the devil is in the implementation.

According to Adhia, the overhaul will involve rationalisation of rates by the GST regime’s fitment committee. However, the Centre and the GST Council should go beyond the fitment issue and address the exasperation over the GST Network. The system does not allow for returns to be ‘saved’ periodically, even as some 15 pages need to be uploaded. This has resulted in delays in uploading returns, given the unreliable internet connection in many parts of the country, for which the enterprises are paying the price. While the finance minister has waived the penalty on August and September returns, the government should first sort out design issues in GSTN, which include difficulties in matching invoices, facilitate the filing of periodic summary returns, and settle for detailed returns on a quarterly or half-yearly basis.

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