Tryst With Destiny: At the stroke of midnight India wakes up to Goods and Services Tax

The President, Shri Pranab Mukherjee and the Prime Minister, Shri Narendra Modi pressing the buzzer to launch the Goods & Service Tax (GST), in Central Hall of Parliament, in New Delhi on June 30, 2017.

President Pranab Mukherjee and Prime Minister Narendra Modi symbolically pressed a buzzer at the stroke of midnight, signalling the launch of goods and services tax (GST) with its impact on prices and businesses likely to play out over months in an economy characterised by multiple pain points.

“In the building of a nation, some moments come when we reach a new turn to scale new heights,” Modi said in the speech at Parliament’s Central Hall. “Today at midnight all of us together will determine the nation's next course”.

“GST is a tax system of new India, of digital India,” the Prime Minister said. “GST is not just a tax reform, it is also an economic reform and a social reform”.

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Prime Minister Modi credited all political parties and previous governments for GST, billed as India’s biggest reform initiative that kicked-in from July 1, ending more than 14 years of painstaking negotiations among the Centre and the states.

GST promises to overhaul India’s indirect tax system by consolidating an untidy patchwork of local and central duties such as VAT, central excise and octroi into a single levy, make the tax administration more efficient and turn India into a common national market by removing fiscal barriers among states.

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“GST is actually Good and Simple Tax. Good because it frees up layers of taxes, simple because it helps return filing easier,” Modi said. “GST, is an example of cooperative federalism shows the collective strength of team India. “Regardless of party and governments, GST council shows that upliftment of the poor remains paramount”.

Besides the President and the Prime Minister, Vice President Hamid Ansari, Lok Sabha Speaker Sumitra Mahajan, and former Prime Minister HD Deve Gowda, were present on the dais, the event whose preparations were personally overseen by finance minister Arun Jaitley and Parliamentary affairs minister Ananth Kumar.

With political risk management often taking precedence over the need for reform, GST’s rollout has seen several missed deadlines, as consensus eluded discussions led by several union and state finance ministers.

But, a string of opposition parties including the Congress, which for years has marshalled the reform initiative to replace a welter of regional and central duties with a single levy, stayed away from GST’s symbolic midnight rollout.

Congress Vice-president Rahul Gandhi on Friday dubbed the GST implementation as a “tamasha” (gimmick) and said the tax reform measure was being rushed through in a “half-baked” manner as a “self-promotional spectacle”.

The Left Parties, Mamata Banerjee-led Trinamool Congress and Tamil Nadu’s DMK too boycotted the event arguing that the rules and duties under GST will hurt small traders. The lack of bipartisan political presence in the event somewhat tempered the grandness of the event designed to draw comparison with August 15, 1947 marked by India’s first Prime Minister Jawaharlal Nehru’s famous “Tryst with Destiny” midnight speech in Parliament.

The boycott was also in contrast with the unanimity and consensus seen in the multi-party GST Council, the apex decision making authority headed by finance minister Arun Jaitley and represented by state finance ministers.

“GST is the result of broad consensus between the Centre and states. It is a tribute the maturity and wisdom of India's democracy,” President Mukherjee said.

Several members of Parliament, state finance ministers, GST council officials, former chairpersons of the erstwhile Empowered Committee (EC) of state FMs including former West Bengal finance minister Asim Dasgupta, and officials were the event where a short film on the subject of GST was screened.

“GST is a great example of political bipartisanship. All decisions in the Council has been taken through consensus,” Jaitley said.

Under GST, all goods and services have been placed under four slab structure – 5, 12, 18 and 28 percent – along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks. Most services, except those in the negative list of essential services such as healthcare and education, will come under GST.

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The multiple tax structure has drawn criticism from traders, retailers and business leaders as many feel it will distort the system and go against the `one-nation, one-market’ concept.

Also, industry bodies and traders have repeatedly sought more time to enable glitch-free filing of returns, minimise erroneous entries and the get accustomed to the GST Network (GSTN). GSTN is a portal-driven IT backbone created to enable real-time taxpayer registration, filing returns, handle invoices, execute inter-state tax settlements, and connect states for two-way data flow.

Both the President and the Prime Minister foresaw teething problems but urged businesses to bear it out. “It is true that everybody is not technology friendly. But the adjustment is as simple as a change in the power of prescription glasses,” Modi said, asking traders not to fall prey to rumours.

The country is in the middle of the biggest one-off sale season ahead of goods and services tax (GST) as nervous traders tentatively prepare to transit to the new tax system. A mid-year switchover to GST have prompted anxious shops to de-stock and clear up the inventory pile ahead of July 1 when the new system kicks in. Traders, responding to a three-day bandh call, shuttered down their shops in big retail markets including Delhi’s Chandni Chowk to protest against GST.

“GST is a disruptive change no doubt…there is bound to be some teething problems,” the President said. “It will make tax incidence transparent and will be administered through a modern IT system.”

gaurav.choudhury@nw18.com