Washout and the GST

It was a washout but only one hopes that with it the hopes of the people will not be washed out.  Being the largest democracy it is obvious that legislative process is a fundamental trait of Parliament and the key arm of the executive.  Whatever Bills, aimed at improving the living conditions of the people who vote, have their fate decided there and then only their impact is realized on social growth.  But in the last session none of the Bills, including the crucial GST, had been passed making it patent that the benefits of the GST will not reach the average consumer even in 2017.  This is because the Bill has to come into effect by April next year and its benefits will percolate down slowly.  Unless of course there is a special session but would it make it mandatory on the recalcitrant Congress that it should cooperate? Besides there are the Whistleblowers Bill, among 14 others, which are awaiting the nod of the Rajya Sabha. 

With the Congress it was a case of you did it and so we return the gift.  More than that the party appears to be desperate to catch at straws for its political survival-  look for any issue from farmers to FTII and OROP – almost justifying the perception that it is unreconciled to loss of power.  (be it power for the family.)  It is clinging to the pathological perception that it authored the GST Bill but it failed to get the consensus of the States for a number of political reasons then. 

Time to Flow

While the BJP cannot be complimented for having done it the fact remains that GST is crucial to the growth story as uniform tax structure on all products and services will boost the revenue of the States especially those where the manufacturing and other units are located.  It is said that benefits will take time to flow but will be realized reasonably before the term of the Modi government ends in 2019.  Moreover the credit potential of the government too will be better as the corporates can bank on it for its operations. 

So what is the scare plaguing the Opposition, especially Congress?  Essentially projects such as Digital India, Smart Cities are aimed at generating enough funds from the Central pool for the States while they can also augment it from their funds.  Also the ultimate realizable objective is to create job generation pools there in order to concentrate the work force and also provide housing.  With the huge investment potential that the visits of the Prime Minister Narendra Modi to various countries had promised these projects will take off and sustain only with the participation of the States.  It may be a long-drawn process but is the nodal point of India’s growth graph.  Here in is the rub for the Congress and the Opposition that its political mileage could also be shored up by the BJP. 

But in the present context GST is central to the growth story as it is claimed that it will push the GDP by nearly 2 p.c in the immediate period.  States where consumption of services and products is high the revenue gain is also high.  It is said there could be an immediate increase in prices of products but the States stand to benefit from substantial revenue gain and also the fact that VAT, central excise duty and central sales tax are subsumed in an uniform GST.  States where manufacturing is done are known to lose revenue on this count but will be compensated by money accruing from 1 p.c. additional tax on inter-state sale of goods.  Essentially GST will go a long way  in streamling intra and inter-state traffic of goods and services where the states and the manufacturers are expected to benefit substantially. 

No wonder the corporates are concerned over the logjam as dual and multiple taxation over the years have left them high and dry.  But the concerns of the Opposition, especially that of Congress, are different and that is another story.


More by :  K.S. Subramanian

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