Make GST simple

REVENUE Secretary Hasmukh Adhia’s confession that there is a need for “some rejig” in GST rates to reduce the burden on small and medium businesses, was way overdue. Of course, it is also politically timed. It will be seen as yet another desperate attempt by the ruling BJP to regain ground in Gujarat. It is suggested that Adhia’s statement will help the BJP pacify agitating Gujarati businessmen, its traditional supporters. Earlier, PM Modi had also made a feeble attempt to shift the ire of Gujarati businessmen on to the Congress by calling it an equal partner in the hastily implemented GST.

Adhia’s statement has two crucial points for businessmen: GST rates will be slashed; and a better future awaits them in a year’s time. The first observation can only be a direct admission that GST was implemented without proper homework. It also reflects very poorly on the policy planners. Even after spending 18,000 man-hours they could not harmonise taxable items. The second point is even less flattering. It tells harassed SMEs to endure another year. The four months of chaos and confusion have already killed several industrial units. Over 65,000 small textile units and job-workers of Surat are facing extinction because of GST-related issues. Even as they are located in an exempt category, their patrons — retail majors — want to purchase goods only from GST-registered vendors to get input credit. This is the tale of confusion and anger in almost all industrial clusters. 

Adhia’s remarks indicate that the next GST Council meeting will again slash tax rates on several items. But, this will not soothe the GST pangs of small businessmen. PM Modi needs to rise above the temptations of political brownie points, and, instead revamp the GST regime to its original spirit; a simple and uniform taxation system. He can win the confidence of the business community by reducing the compliance burden and minimising tax rates to two slabs (excluding zero duty on essentials and a cess on luxury items). A plethora of exemptions and ad hoc changes will make the new tax system more cumbersome than the previous VAT regime.