A short and crisp video
unveiled by President Shri Pranab Mukherjee and Prime Minister Shri
Narendra Modi for the launch of the Goods and Services Tax in the
majestic Central Hall of Parliament captured the clear objective behind
country’s most important tax reform till date. Unlike what economists
and other commentators have been telling us as to how the GST would push
the country’s Gross Domestic Product and make life easier for the trade
and industry, the launch film showed a much broader aspect of the modern
taxation that has the country’s people, especially those economically
less privileged at its core.
In his inspirational speech at mid-night of June 30, minutes before the
roll out, Prime Minister, referred to GST as a life changing instrument
for the poor particularly in eastern Uttar Pradesh, other eastern states
and the North East. Even as they are blessed with rich natural
resources, these states have not been able to fully exploit the same for
On face of it, one might ask, how is GST going to be of great benefits
to the poor of the country, or is it that the same old “trickle down “
theory is supposed to play a role , via trade and industry. To an
extent, it could be so, but the very character of the GST would ensure
in realising what the Prime Minister said before the country’s most
distinguished audience. The country’s mature polity and cooperative
federalism has finally delivered a system, which is people –centric and
not necessarily manufacturer centric.
Unlike the excise or other levies, the GST that subsumes seven Central
and eight state taxes, is not source or manufacturer based but a
destination or consumer centric. In plain and simple language, the
states which have more consumers would stand to gain immensely in terms
of tax buoyancy that would then be channelled in the welfare schemes for
the people and overall economic development of the states. Surely,
states of Uttar Pradesh, Bihar, Odisha, West Bengal and North East,
which did not have much of a manufacturing base and were losing on
revenue would stand to gain while the developed and manufacturing hubs
would be compensated at least for five years of the GST launch. More the
consumers, higher is the tax collection in a state; though the consumers
need to be economically empowered!
The growth impetus to these states which could not keep pace with the
states like Maharashtra, Gujarat, Tamil Nadu or Karnataka in
manufacturing, would come from trade which in turn would generate huge
resources for ploughing back into development efforts. Such a vibrancy
would then lead to interest of investors, both domestic and global, into
manufacturing and related service sectors, opening vistas for job
creation for millions of people.
“GST is a system that ends the imbalances in the country’s trade. It
also boosts the exports of the country. This system not only provides
impetus to already developed states but also provides the opportunity to
the backward states to develop. Our states are enriched with natural
resources – look at Bihar, eastern UP, West Bengal, the north east,
Odisha. They are all brimming with natural resources. When they will get
a single tax regime I can see clearly that whatever deficiency is there
those will be removed and this art of the country will move ahead. All
the states of India will get equal opportunity for development”, the PM
put the context right.
Besides, the one nation –one- tax from “Ganga Nagar to Itanagar “ in the
words of Shri Modi, would surely make life easier for the industry,
trade and common person in different ways, encouraging honest way for
the economic transactions. This is why, the GST has been dubbed as ‘Good
and Simple Tax’ that would bring in a new governance culture.
Both the PM and the President gave full credit to different political
parties and governments at the Centre and the states in making the GST a
reality. “This is not a Sidhi (realisation) of one government or a
party; it is a fruit of common efforts”, the Prime Minister said. The
President, who had himself played a pivotal role in the progressive
journey of the GST as Finance Minister in the previous government, had
some apt words:
“The new era in taxation.... is the result of a broad consensus arrived
at between the Centre and States. This consensus took not only time but
also effort to build. The effort came from persons across the political
spectrum who set aside narrow partisan considerations and put the
nation’s interests first. It is a tribute to the maturity and wisdom of
One of the principal advantages of the new tax regime would be doing
away with the cascading effect resulting from ‘tax on tax’. Through a
robust IT infrastructure, the system of input credit ensures that it
gets passed and adjusted against the tax liabilities. This would only
help the consumers. “The prices of goods and services will come down. In
the earlier system, the credit for excise duty, service tax, VAT and
other indirect taxes did not get passed to the last vendor. But, in the
GST, such credit goes to the supplier at the last stage of the value
chain which then gets transferred to the consumers,” said noted tax
expert Shri Brij Bhushan.
Finance Minister Shri Arun Jaitley too has been impressing upon the
industry to pass on any gains which accrue following the GST roll out.
He hoped that the government may not have to use the powers vested in it
through the Anti-Profiteering Authority to ensure that the benefits get
passed on to the common citizens.
While even the President Shri Mukherjee said that there could be
disruptions in the initial stage, such a thing would be constructive
disruption. Once we are through the teething troubles and initial period
of adjustment, GST would prove to be a people-centric, capable of
*Prakash Chawla is a senior journalist and commentator. He mostly writes
on political-economy and global economic issues.
Views expressed in the article are author’s personal.