GST: Rollout went well, but many challenges ahead
On July 1, the new GST replaced 40 levies in India, a move aimed at simplifying the current tax structure. In good news for millions, the rollout went smoothly, unlike the Modi government's first disruptive idea of the sudden demonetization of high-value banknotes. India is rarely praised for bureaucratic efficiency. However, there are many challenges ahead to ensure smooth continuation of the system.
What helped the transition?
The government made sure businessmen got enough notice to shift to the new system: traders knew at least two months in advance. It also tried to appease various constituencies. The GST Council held long meetings to formulate a proper plan and decide on tax rates.
But there are risks involved
However, the new system isn't risk-free. Long discussions have resulted in a complex four-slab structure, which isn't very simple. Eg, higher-end hotels, restaurants and movie theatres are taxed more than simpler ones. This might push businesses to shift their products into lower slabs. Many goods have also been excluded from the structure, giving states a free hand to raise taxes on them any time.
Rules are also being broken
Few states have already attempted to impose more taxes on goods which are anyway covered under GST, like automobiles and movie tickets. There's no check on officials subverting the system by halting services that are supposed to get simpler. Paperwork at customs posts for truck drivers has officially reduced, but local officers can still clog the process unless they are paid.
The government has to take steps
The government has to remain alert and keep working at simplifying the system further, like reducing the number of slabs to one or two. This has to be done soon. The longer the delay, the harder it will be to change tax preferences.
