GST set for red-carpet rollout, finance minister Jaitley appeals to everyone to be part of launch
The GST will replace about 20 central and state taxes such as factory-gate duties, service and local taxes while unifying Asia’s third-largest economy and 1.3 billion people into a single market.
Finance minister Arun Jaitley asked all opposition parties to be a part of the high-profile July 1 midnight launch of the goods and services tax (GST) as the government geared up on Thursday for one of India’s most ambitious reforms.
“I hope every political party will reconsider and revisit its decision,” he said.
Parliament is decked out with festival lights and rehearsals were conducted ahead of the Central Hall function that President Pranab Mukherjee, Prime Minister Narendra Modi, senior ministers and bureaucrats will attend.
The GST will replace about 20 central and state taxes such as factory-gate duties, service and local taxes while unifying Asia’s third-largest economy and 1.3 billion people into a single market.
The finance minister thanked state governments for the “collaborative effort” to implement the new system. His cabinet colleague Venkaiah Naidu requested parties to rise above politics for the successful rollout of the single-tax regime.
The appeal follows the decision of the Congress, Trinamool Congress, DMK and Left parties to boycott of the midnight ceremony, saying the country was “ill-prepared” for its implementation.
Former Prime Minister Manmohan Singh, who was a special invitee, is likely to skip the event.
First conceptualised in 2000, the GST underwent several changes in 17 years to emerge as a multi-tiered tax structure, which economists believe will undermine the advantages that a uniform indirect tax would have affected.
“Given the multi-tiered rate structure and the enormous paperwork involved, there should have been a six-month preparation time to allay fears of traders,” economist Mohan Guruswamy said.
Foodgrain, cereals and vegetables have been zero-rated, while other rate slabs are 5%, 12%, 18% and 28%. A cess will also be added to so-called “sin and luxury products”.
But experts believe the GST will lead to long-term gains for the $2 trillion economy.
“There will be formalisation of the economy, broadening of the tax base and this will lead to better tax collection,” said Soumya Kanti Ghosh, group chief economic advisor of the State Bank of India.
Traders too welcomed the GST, saying it is progressive, but some confusion remained.
“There are disparities. For example, the tax on a lock fitted in a door is 18%, but tax on the handle is 28%. Now these are bundled products, so how will a trader decide which rate to charge? This will add to accounting and compliance problems,” said Praveen Khandelwal, secretary general of the Confederation of All India Traders (CAIT).
The government says the rate on the main product will prevail.
The new system has attracted protests by small- and medium-scale entrepreneurs, traders, weavers and informal-sector workers over the tax rates.
Textile traders are on strike since June 27 against the proposed 5% GST, while those in the furniture business in New Delhi took to the streets over the 28% tax slab on their products. Diamond merchants of Surat are also said to be unhappy about the rates.
But the Bhopal-based spokesperson of the CAIT, Radhey Shyam Maheshwari, said: “This is a good opportunity for traders with irregular accounts to make everything legitimate.”
The government is confident that the traders will adjust to the new system. It has set up a “mini war room” in the Capital to tackle all GST-related teething problems.