Can The GST Be Fixed?

Ever since it was launched in July, 2017, the Goods & Services Tax that replaced dozens and dozens of separate taxes imposed by individual states, it has faced flak for being too complicated and also for being harsh and small and medium businesses by landing them with a lot of paperwork-even if it is done digitally. Rates and slabs have been tweaked scores of times based on feed back received from stakeholders. The just concluded meeting of the GST Council headed by Finance Minister Nirmala Sitharaman has been no different. It has been decided now to impose GST on hotel rooms with tariffs of less than Rs 1,000 per day, and perhaps increase the rate for solar batteries. During the meeting held on June 28 and 29, 2022, it was also decided to set up a meeting on August 1 to start the process of constituting a GST Appellate Tribunal. Critics of the Narendra Modi regime have slammed the government for further burdening the middle class Indian at a time of high inflation. They point to GST on terms like curd and unbranded packaged food among other things to reinforce their point.

Despite all the complaints, the glitches and the bureaucratic complexities, data seems to suggest that GST is now a bona fide success story.in the first few years after it was launched in July, 2017, its was extremely rare for GST collections to go beyond Rs 1 lakh crore in a month. It started showing signs of buoyancy in late 2019 and crossed the Rs lakh mark in collections in February, 2020. Then India and the world were ravaged by the Covid pandemic and collections nosedived along with economic activity because of lockdowns. But by October, 2020, GST collections once again crossed the Rs 1 lakh crore mark. May 2022 was the eleventh consecutive month where GST collections crossed the Rs 1 lakh crore mark. As the accompanying chart indicates, GST collections are averaging more than Rs 1.4 lakh crore in 2022. In effect, the annual GST collections will be close to Rs 17 lakh crores, higher than the original estimates. Apart from an economy in full recovery, improved compliance and a gradual removal of glitches are seen to be important factors behind this healthy rise in GST collections. It augurs well for the states as well as the centre.

The GST system was being discussed and debated for a long time in India. But it could not be implemented because the states were way of giving up their right to impose and collect a slew of local excise and sales taxes. They were also mistrustful of the centre being even and open handed in sharing the taxes collected through GST with states. It took the late Arun Jaitley, who was the Finance Minister between 2014 and 2019, a series of marathon meetings with all state finance ministers and other stakeholders before a consensus was arrived at.