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What GST means for India and you

May 30, 2017

India’s landmark indirect tax reform has never been short of controversy. Initiated by the previous United Progressive Alliance government and resisted by the then Opposition, it is now being pushed through by the very parties that once battled it tooth and nail. However, while concerns abound, the general consensus is that a single national market with a uniform tax structure is a necessity and that the GST will create just that.

Yet, for such a revolutionary step, till just a few days ago, the country didn’t know what would be taxed and at what rate. This is another indication of how tangled policy transformation can be in India.

What’s most worrying is that the promise of simplicity has been replaced by a level of complexity in the administration of the regime. It is hardly the wrinkle-free system envisaged what now seems a long time ago. In fact, the tax slabs unveiled recently seem heavy with political compromise.

As the government seeks to place a large feather in its cap, there is also little by way of measures to deal with the inevitable inflationary bump every country has experienced after introducing GST. Given the political stakes, it’s hardly surprising that most components of the consumer price inflation index – foodgrain, cereals, etc – have been exempted from GST.

A concern that keeps arising is compliance. It looks like it’s going to get tougher and costs may rise, hurting small businesses hard.

There is, therefore, a lot of work that still needs to be done.

Yet, there is no taking away from the fact that this is a watershed moment for the economy. As the world moves rapidly toward globalisation, it is inconceivable for India to not be even a common national market.

As a subcontinent, India should be applying the learnings from the economic integration of nations to form trade blocs and common markets, setting free trade and creativity. We know from the European Union, for instance, that free movement of goods and services had a massive impact on overall public good.

There is much benefit to be gained from becoming one common economic entity.

This article was first published on LinkedIn by Ashraf Engineer

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