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GST At 100

GST At 100

In this era of cricket, it is natural for us to keep our fingers crossed and wait for our best player to hit a century. We do not want the player to go back to the pavilion, without crossing this magical figure.

While there is one player who has affected our lives in more ways than one but not many would have waited for its 100. For every passing day, it scored one run. The player in question is GST, which started its innings on July 1 and has recently scored a century. Yes, GST is now 100 days’ old. It is time to assess how it has actually impacted our lives, the nation’s health and the government’s prospects.

Barely a month ago, finance minister Arun Jaitley announced a bumper tax collection of Rs. 94,063 crore, which crossed the government’s expectation of Rs. 91,000 crore. The government proudly said it came only from 64.42 per cent of the taxpayers as the rest still need to register with GST.

NITI Ayog estimated that the government is expected to have a tax revenue of Rs. 26.48 lakh crore by 2019-20, as compared to Rs. 17.03 lakh crore during 2016-17. An increase of 14 per cent is predicted in the financial year 2017-18 with a gradual increase of 16 and 17 per cent in the coming two financial years.

However, the collections registered a dip in the next month itself from Rs. 94,063 crore in July to Rs 90,669 crore, which is also lower than the government’s expectation of Rs. 91,000 crore in a month. This is certainly surprising as the GSTN (GST Network), has carried out little improvements in the technology for filing returns after the bitter experience in July. Even the number of returns filed came down to 3.76 million from 3.83 million in August, while the number of tax payers is reported to have increased from 5.96 million to 6.82 million.

Be that as it may, the government is certainly happy with its initiative. The revenue is expected to increase, considering the five different slabs it announced — 0, 5, 12, 18 and 28 per cent -- and a cess to complement its revenue. In other words, “one nation, one tax” is actually “one nation, six taxes”, that is solely designed to boost the tax collections of the government. But how has it fared as far as the common man or the local trader is concerned?

Even though the GST has not led to a considerable spike in prices of essential commodities or its shortage, the consumer inflation index has shot up. It has certainly disturbed small and medium enterprises and exporters, who are struggling to make both ends meet.

A report suggested that there is an increase in the working capital costs after implementation of the GST. Small businessmen have complained that they have to deposit the entire amount of the GST, while large corporate buyers or the original equipment manufacturers hold their payments as uncertainty prevails over their tax liability.

Small traders are not able to claim tax inputs leading to cash crunch. Some are also forced to borrow money from non-banking channels to keep their business running. To add to their woes, there is a delay in refund of tax claims from the government’s part. The government has promised to refund the money within 90 days but considering the initial hiccups, it is likely to take more time.

There have been concerns about certain items falling in a higher tax slab. The government has largely been flexible about the tax rates as we could see a few changes last month. However, the anti-profiteering provisions and implementation of e-way bills will be another hurdle in the coming month, especially when it is festival season, when sales are expected to increase manifold.

Implementation of e-way bill implies that every firm that is registered with GSTN is required to furnish information related to movement of goods worth Rs. 50,000 in case they are transported by road beyond 10 Kms. The idea is to track the goods and facilitate the inspection of goods. This has not gone well with the industry at large as any government official can now stop a vehicle and harass the traders, something that is also against the very spirit of goods and simple tax.

While the anti-profiteering provisions were notified so that the benefit of tax-rate reduction is passed on to the end consumer, there are conflicting opinions on the very intent of these provisions as well. The businessmen, especially those who deal in high-value products, have started feeling the heat as there is a visible change in their prices. These provisions allow the anti-profiteering authority to investigate and also levy a penalty for an undue increase in the price of the product. In some cases, the authority can also ask the traders to deposit money in the consumer welfare fund. In other words, they are little wary about increasing their prices.

On the contrary, there have been instances where companies have been found to levy the GST on maximum retail price (MRP) of the product. In other words, the consumer is certainly getting hurt as it has to pay a larger amount now. As per law, any price above the MRP is illegal but, then, no one is there to check as to how and on what amount the retailers are levying tax. Even the online retailers and e-commerce portals are allegedly charging the GST over MRP!

A survey covering 8,800 people concluded that 51 per cent of the participants complained that they were being charged the GST over and above the MRP. Around 20 per cent of the participants complained that though they were given a discount on the product, the GST was levied on the MRP. And interestingly, 26 per cent reported that they bought a few products without any bill, indicating that the traders could easily evade taxes with what is called a  kachha bill even now.

The consumer goods (mandatory printing of cost or production and maximum retail price) Act of 2006 clearly stated that the MRP is inclusive of all taxes. And a retailer is prohibited under the law to sell at a price higher than the MRP. Simply put, the idea of levying taxes on the actual manufacturing cost or value addition in the product has already been defeated. There are several laws that make selling a product over and above the MRP as an unfair trade practice. Under the GST as well, this practice is against the anti-profiteering provisions, which may lead to cancellation of registration of the retailer. No one has, perhaps, been taking cognizance of such instances, which have been highlighted by the media a number of times.

The government’s claim that prices of essential commodities will reduce also seems to have backfired to a large extent. A leading daily published a price comparison of 29 different items of daily use (essential commodities) with pre and post GST prices. It was found that the prices of nine items have increased and prices of 14 remained the same. Only six products registered a reduction in price.

Some may come up with the contention that the items which showed an increase in price must have come under 28 per cent tax slab. To lend more clarity, the newspaper also published that those falling under the highest tax slab showed no increase in price whereas the items that fell in the 5-per cent tax slab had a higher price. Prices of the commodities with 18 per cent GST showed a decrease. Now this raises a question on how the tax slabs have been defined even for essential commodities!

The common man is already shelling out 3 per cent extra on what was being paid for almost all services like banks, telephone, electricity etc. In other words, while the government may enjoy its tax harvest, people will have to suffer at least for a year or so till the time the corporates have transitioned completely to the new tax structure and the government lends more clarity to the tax provisions.

 In short, the GST can still be termed as work in progress. It is still in an experimental stage. The government should have a set of lessons every day to improve upon and pass on the benefit to the consumer, while keeping in mind the interest of small businessman as well. As of now, the 100-run score has not been that great to have made a history or spread joy among the spectators.

(The writer is a company secretary and director, communications, Deepalaya and can be reached at

(Published on 09th October 2017, Volume XXIX, Issue 41)