a one nation, eight tax rates structure under the proposed Goods and Services
Tax (GST). The new tax structure looks, as introduced from 1 July:
firstly, zero tax rate for essential items that is used by the common man. Then
we have the 5 percent, 12 percent, 18 percent and 28 percent slabs as decided
in the beginning by the GST council. With additional cess on luxury goods,
there is a sixth slab. The seventh slab will be at 0.25 percent for the rough
diamond and the eighth and final is for gold at 3 percent.
Finance Minister Arun Jaitely has time and again
explained the multiple tax structure within GST and the benefit of the same.
India with a population of approximately 1.32 billion having economically
diverse population and each and every state having varying culture and
character, having single rated tax would have been disastrous. The richest 1% of Indians
own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of
the wealth. This trend is going in the upward direction every year, which means
the rich are getting richer and the poor are getting poorer.
with multiple tax rates is to minimize economic distortions in tax design . If
there had been the old scheme of single rated tax, that would have been detrimental
for the poor. The nature of GST after multiple tax rate system can be
classified as proportional in nature rather than being called regressive solely. This reform gives equal footing to the big
enterprises as well as Small and Medium Sized Enterprises(SME) . The aim of GST
is thus to simplify tax hurdles for the entire economy.
As well 29 states have
abolished their check points at their borders , where tax compliance and
inspection used to delay deliveries often by days. Travel time has been reduced
and as well transportation of illegal goods has
reduced because those businesses cannot provide GST-compliant bills.
Advice Chanakya gave about taxation – “that it
should be easy to calculate, convenient to pay, inexpensive to administer and
equitable in its burden.”
Current GST structure has attracted criticism from
certain quarters, as it doesn’t abide by the idea of “one nation , one tax”. It
is believed that having multiple rates defeats the basic purpose of GST that is
simplifying the old tax structure.
The response of the people
after introduction of GST can be summarized in one word and that is PERPLEXED. This
taxation was not welcomed whole heartedly with people as it demanded them to be
equipped with new technologies and
processes and leave their old practices. Small
traders and businesses struggled to issue invoices and battled with the new
software, with some forced to provide handwritten invoices to customers. Traders,
particularly in small towns, are struggling with their lack of knowledge of the
new tax regime — compliance obligations, raising invoices and accessing input
credits, said Praveen Khandelwal, secretary general of the Confederation of All
India Traders. Example: Footwear
below 500 rupees attracts one rate and above that price attracts a higher tax
rate, leaving suppliers confused over which rate they should apply.
merchants and e-commerce companies are stumbling over confusing array of
documents and complicated multiple rate system that determines what percentage
of tax will be charged. It has affected negatively the small merchants have stopped
selling on e-commerce sites because they can’t cope up with these new requirements.
Small business owners, as well as traders and shopkeepers who have never turned
on a computer, are scrambling to acquire the skills to navigate these
“People are finding it tough to understand the
GST,” said Pradeep Singal, national president of the All India
Transporters Welfare Association. “This has meant that companies had
ordered in advance and are still using old stocks,” pushing down transport
business by 30 percent.” As quoted in Economic times .