True to promise, Finance Minister Arun Jaitley has pruned the Goods and Services Tax (GST) on several items and brought relief to large sections of people who were groaning under the weight of high GST.
This is indeed a welcome measure that should bring a smile on the faces of a substantial number of people. Tax compliance procedures have been eased and penalties for late filing of returns have been slashed as part of the new norms. For the Opposition at large that was banking on winning over the traders lobby in the Gujarat assembly elections by alluding to the BJP having betrayed their trust, this would doubtlessly come as a major setback because it largely meets the objections of this lobby both in terms of the quantum of tax and the excessive paperwork that most of them have been complaining about.
Out of 228 items in the 28 per cent tax bracket, 178 have been put into the lower tax category of 18 per cent under a consensus evolved at a meeting of the GST council in Guwahati. Detergent, marble floorings, toiletries are among items shifted to the 18 per cent tax bracket. The tax rate on 13 items has been reduced from 18 per cent to 12 per cent, while the rate on five items have been cut from 18 per cent to 5 per cent. Six items have gone from 5 per cent to zero.
Considering that pre-GST there was a plethora of taxes, the new windfall seems like a godsend. The restaurant industry and the consumers who held a deep grouse against the high rate of GST will nowpay a uniform 5 per cent tax for all AC or non-AC restaurants. However, restaurants in starred-hotels will charge 18 per cent tax with input tax credit. The eating out phenomenon which had been severely hit will now predictably be back with a vengeance. One is left wondering whether this was a deliberate ploy by the government to announce high rates and then make the concessions look like a windfall.
The surmise that not enough groundwork was done by the government before the announcement of GST implementation and that the whole exercise was carried through in haste is inescapable. But one can hardly rue the fact that all is well that ends well. That the government has responded positively to public exasperation over the earlier announced rates is a happy augury. With the heartburns now taken care of, it is to be hoped that the implementation would now be smooth and whatever procedural glitches that remain to be ironed out will now find fruition. The liberal tax rates will cost the exchequer nearly Rs 20,000 crore and it remains to be seen how the Modi government raises resources through alternative routes. The annual budget will be a good index of how the government balances its need for resources for development and infrastructure with the imperatives of public welfare.