Biz & Economy

6 Months Of The GST Saga: Quick Highlights

6 months of GST saga -->

From the video, you must have pretty much got an idea of what GST (Goods and Service Tax) is all about. Now, let’s take a month by month review of how the tax reform has fared in India.

July: India’s biggest tax reform was introduced

With the press of the buzzer at the historic midnight event, India entered a new era of tax on July 1. This tax promises a big boost to the Indian economy as it ensures accountability and transparency in the business activities.

However, the initial days of GST invited a lot of flak from the public, different sectors and organisations. Smooth implementation meant updating the entire system and economy to accept the new tax slabs – 5%, 12%, 18% and 28%. But were we prepared?

Not really! In the initial few weeks of the rollout, confusion prevailed over new tax rates, basic fundamentals of GST, compliance obligations, the applicability of HSN codes etc. Approximately 50% of the Indian businesses were not aware of the changes that the implementation would bring with it. Further, the Indian Bank’s Association informed the parliamentary panel that the sector was not prepared for this revamp as it required huge changes in the infrastructure, which is a huge challenge for the banks.

August: Finalised the much awaited e-way bill provisions

In the second GST meeting, the Council finalised the much awaited e-way bill provisions. E-Way bill is an electronically generated document on the GST portal which needs to be generated to transport goods worth Rs. 50,000 from one place to the other. E-Way is a replacement to the ‘Way Bill’ which was a physical document.

The new bill provisions will make help increasing the movement of goods and make the supply chain more efficient, claims the government. Under this mechanism, the entire process becomes easier, eliminates manual errors and prevents tax evasion and revenue leaks.

September: Nationwide protests by handicraft workers on GST

With most sectors hit by the ‘one nation, one tax’, the handicraft and handmade product industry were hit the hardest. As per an NGO working for handloom weavers, the cottage industry which was already on a verge of dying will face even more difficulties after the GST roll out.

Before the GST implementation, all the handmade products like Khadi, handlooms, handicrafts, were exempted from tax. But however, now they would be between the tax slabs 5-28%. Such products which were naturally expensive will become more expensive after the tax addition.

As a result, handicraft workers and traders took to the streets demanding the handmade products to be put back under the zero tax slab. Therefore, the government decided to slash the prices on 18 handicraft items which include items like idols made of clay, wood, stone, metals, table and kitchenware and some natural fiber products.

October: Government reduces the burden on small business and exporters

With GST, came more compliances, more confusion and more complications for the small business owners. For instance, under GST, a trader or an organisation would be required to file 36 returns in a fiscal year, that’s 3 returns a month. This would require the small business owners to shell out more time and cost for technical staff, thus increasing the cost of tax compliance.

Thus, PM Modi instructed the GST Council to suggest solutions to provide relief to the small businessmen. The Council in the meet recommended a reduction of tax rates on 27 items. The items for daily consumption were placed under the 5% slab. For instance, the tax slab of unbranded namkeen has been reduced from 12% to 5%. Further raw material like plastic and rubber waste witnessed a drop from 18% to 5%.

Further, the Council also set up a Group of Ministers to look into various issues faced by this sector.

November: Dining out became cheaper

A great development in the month of November was the government doing away with the tax levied on restaurants. They dropped it from 18% to 5%. So now, all the restaurants, both AC and non-AC, would levy a uniform 5% tax. While doing so, they did away with the distinction between A/C and Non-A/C in restaurant’s previously charged 12% in Non-A/C and 18% in A/c.

Along with this clarification, the GST council decided to slash the taxes of 178 items in the tax bracket of 28% to 18%. So, items like chewing gum, chocolates beauty products, wigs and wrist watches etc. were reduced significantly.

December: Government hints to merge 2 tax slabs

Arun Jaitley, the finance minister, indicated that the government and the council might merge current tax slabs of 18% and 12% into one. Thus, the number of slabs under GST would be limited to just 3. Further, the council also stated that they would consider reducing the number of items under the highest tax slab ie 28%.

Despite the initials months of confusion and chaos, experts have stated that GST is a short-term pain but has long-term benefits and is expected to give the much needed economic boost to the nation.

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