JUNE 30, 2021

By Vijay Kumar

ON 01.07.2017, I wrote in TIOL,  GST is here - Enjoy the inevitable

From 0000 hours of today, every Taxpayer, rather every Indian is assumed to be fully aware of all the pristine legislative provisions, for as they say, 'ignorance of Law is no excuse', especially on the part of taxpayers. Tax officers, lawyers and judges are exempted.

As a nation, we get the tax we deserve and anyway as God runs this country, if there's a problem, He will fix it, somehow. And if you don't believe in God, soon you will.

The Prime Minister said GST is a collective effort - you can't blame anyone individually. All the decisions of the GST Council have been unanimous

Before a medicine is launched, they usually test it on rats and rabbits, but perhaps no such facility exists or is legally required before a tax is imposed. Unfortunately, unlike the bitter pill, you have no choice with taxation - of refusing to swallow.

Now that GST is in force, I hope the tax officers will read (and perhaps understand) all the simple laws, before they embark upon enforcing them. I fervently hope that all the experts and consultants will read and understand those laws before they advise and preach on GST. As of now, we may also seek the help of astrologers, vaasthu experts and godmen.

This great tax experiment started with the slogan 'One Nation, One Tax ,One Market'. What is this one tax?

1. CGST

2. SGST

3. IGST

4. UTGST

5. Compensation Cess

with VAT and Excise duty still in vogue on certain commodities.

And as for rates of tax, we have six rates, all berating the unsuspecting taxpayer. One does not really mean one - it is perhaps a jumla. There was the Hawaii talk, of not taxing Hawai chappals and air conditioners at the same rate.

It all started with air-conditioners and chappals and ended with milk and Mercedes. Writing in his blog on October 26, 2016, the then Finance Minister Mr. Arun Jaitley stated,

Some have suggested that multiple tax rate is disadvantageous to the GST and would neutralise some of the advantages of a uniform tax structure. The reality is that a multiple tax rate in India is inevitable for several reasons.

Different items used by different segments of society have to be taxed differently. Otherwise the GST would be regressive. Air conditioners and hawai chappals cannot be taxed at the same rate.

The Prime Minister agrees, though his choice of commodities is different. While it was air-conditioners and chappals for Mr. Jaitley, the PM chose milk and Mercedes. In an interview to Swarajya, a day before the first anniversary of GST, the Prime Minister said,

It would have been very simple to have just one slab but it would have meant we could not have food items at zero per cent tax rates. Can we have milk and Mercedes at the same rates? So, when our friends in Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at zero or 5 per cent, at 18 per cent.

Once you understand the intricacies of chappals and milk on one side heckling air-conditioners and Mercedes cars on the other side, GST is easy.

The then Finance Minister was emphatic and postulated certain laws as strong as the laws of motion that:

1. Different items used by different segments of society have to be taxed differently. (Why?)

2. Air conditioners and hawai chappals cannot be taxed at the same rate. (Why?)

And the Prime Minister asks a question, "Can we have milk and Mercedes at the same rates?" and scores a political point against the opposition that it wants to tax food items at 18%.

But if you look at the GST rates, you will find that Agarbatti and Artificial kidney taxed at 5%; Fruit juices, Tooth powder and Sewing machines at 12%; Condensed milk, Kajal, pencil sticks and footwear at 18%; Wall paper at 28%; Diamonds at 3%.

Obviously you cannot charge the same rate for footwear and diamonds. Poor diamonds deserve a less tax. There must be some logic in these rates.

Then, what is this 'One Nation, One Tax' slogan all about. The then FM explained that in Parliament - For one commodity, there will be only one rate in the country.!

Now that's clear; that's what one tax is all about!

And what is this one market if I have to get registered in all the States where I do business? And when can we have 'One Nation, One Tax and one Tax department'?

GST is so simple that chartered accountants, lawyers and judges can't understand it. All the existing issues are brought forward and several added merrily.

A famous poet was asked the meaning of a poem he wrote. He replied,  "when I wrote it, only God and I knew what it meant. It is possible that God knows it still, but as for me, I don't know".

Malaysia introduced a simple GST; it is far simpler now; they have no GST. This, their Government made possible by issuing a notification that the rate of GST with effect from 1st June 2018 would be zero instead of the uniform six percent they had earlier. They had a single rate of six percent for hawai chappals and Mercedes and everybody complained. And it seems the car sales have zoomed more than that of chappals after GST has become zero. And Samsung launched a new promo - GST (Great Samsung Treat) to celebrate the zero GST.

Even before GST came into force, a former High Court Judge and President of CESTAT said in a speech,

"When I saw the GST Bill, it is mind boggling constitutional complexity. It is neither the exclusive list nor the concurrent list; it's a fourth dimensional animal. It is post Einsteinian Physics. Heisenberg's uncertainty of quantum mechanics is elementary compared to the complexity of this. Even the political complexity of States and Union coming together on a continual basis to ratchet the policy of GST is a huge challenge. It is an economical challenge, it is a political challenge, policy challenge, an administrative challenge; it's an adjudication challenge. So that is the next animal that is waiting to pounce on you. But we have to fight, we have to survive.

Maybe we need an overhaul and we should start with the assumptions that:

1. All taxpayers are not in business for cheating alone.

2. Taxpaying is not the only activity of the taxpayers.

3. Tax Department is not the only agency harassing the taxpayers.

4. Complicating the laws and procedures will not bring in more revenue.

5. Technology should assist the taxpayer and the government instead of making life a nightmare.

6. Taxpayers deserve respect and tax collectors are servants of the State.

7. Tax collectors should assist the taxpayers in compliance, not book cases for the impossible.

8. If the system does not work, it is the fault of the government and not the taxpayers.

9. Taxpayers cannot be punished for the blunders of the government.

10. We can certainly do it. We are capable of running a huge railway system, sending a space probe to orbit Mars, holding elections for about 90 crores voters, perhaps even facing the corona virus. Can't we run a simple tax system?

We should device a system on the broad lines that:

1. The Law is very simple and brief

2. The moment a problem arises, there should be a clarification, preferably in favour of the taxpayer.

3. There should be only one registration for one taxpayer for business anywhere in India.

4. There should be only one tax and one tax authority.

5. All that a taxpayer has to do should be to upload all invoices (input and output), pay the tax at the end of the month and fill in a few fields in an automatically generated return.

6. There should be only one rate of tax (yes, one rate for Hawaii chappals and air-conditioners) and preferably a low rate of 5%.

7. There should be an apex dispute resolution body at the National level consisting of a High Court Judge, CBIC Chairman, an advocate and three members from the trade. Their decisions shall be binding on the government.

And talking of systems, to err is human, but to really foul things up you need a GSTN. Don't crib; any system will have initial teething troubles, before they decay into chaotic confusion. We have proved it twice. All those who complain about GSTN should go to the new Income Tax filing site and you will appreciate how great our own GSTN is!

If you (government) poke industries like this, they will run away; But will they?

The Indian citizen knows very well how to face the fury of nature and the calamities it brings, without foreign assistance or an additional Cess on GST. Look at the happy faces in Mumbai enjoying an annual urban flood or the ones swimming against the powers of nature in that God's own land. The Indian taxpayer is no different. He knows how to withstand the fury and might of the Government and its army of officers meant to serve. It is really one of those Indian mystical secrets that quite well-educated, rather rich businessmen suffer silently the hurricane of government fury, just for the fun of running their businesses. In a GST case before the Supreme Court, one of the judges is reported to have stated,  "if you (government) poke industries like this, they will run away". No! your lordship. They will not run away, they will stand and face all the humiliation, all the difficulties, all the tax terrorism, just to stay in business.

Former Chief Economic Advisor (CEA) Arvind Subramanian, in the course of launching his book  "Of Counsel: The challenges of Modi-Jaitley Economy" , said that GST is not a failure but could have been better, if the recommendations in his report were followed.

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