The rationalization of Goods and Services Tax (GST), the first of “a double blast of happiness” before this Diwali and Chhath Puja has come as a relief to people across the board, to the extent that the prices of several items would reduce. This is also claimed to be a major step to offset the US trade tariff financial strain for the people. However, the government must explain why this rationalization took so long. The GST was implemented on July 1, 2017. Eight years have passed since its implementation, which was then claimed to be a market unification reform. It was clear to all that there were many issues with the new system – which was conceived by the UPA government of Manmohan Singh, blocked in parliament by the then opposition including the BJP, but was finally implemented by the BJP-led NDA government. The credit for this reform step should be shared, thus, by both the UPA and the NDA.
The market unification exercise was a gargantuan task, especially as the markets had their own dynamics and were mostly an unruly segment, where middle-men made the largest cut, with consumers on the one side and producers like farmers on the other side bearing the brunt of this chaos. Tax evasion was widespread before the GST implementation, but the fact is also that such practices still continue without much checks. Yet, the market unification exercise itself had its eminent good sides. The tax revenue for the central and state governments multiplied after GST came into force. Much of the infrastructure development that takes place in the country are due largely to the huge funds the GST regime brought to the exchequer. At the same time,it is important that the lacunae that still exist are corrected and the system more simplified and benefits enlarged.
As of now, GST has been simplified to a two-slab structure – of five per cent and 18 per cent. The present reforms cut taxes on household essentials like soaps, toothpaste, Indian breads etc to 5 per cent or nil thereby boosting affordability. The GST on life-saving drugs, medicines etc has been reduced from 12 per cent to Nil or five per cent, obviously making healthcare more affordable. Tax on two-wheelers, small cars, TVs, ACs and cement have been cut from 28 percent to 18percent. This would be benefiting the middle class consumers. Also, tax on farm machinery, irrigation equipment etc., has been cut from 12 percent to 5 per cent, reducing farming costs. On the other hand, the reforms also saw to it that the tax on tobacco, pan masala, aerated drinks, and luxury goods is raised to 40 per cent. In the long run, however, chances are that the prices would again push up. Markets have to be closely watched to ascertain how these tax cuts have been beneficial to the common man.
