Poorly implemented GST could be politically counter-productive

Shubham Sharma
[ July 01, 2017 ] A number of trade unions across the country participated in strikes and staged protests against the imposition of Goods and Services Tax from July 1. The trade unions are opposing the “excessive” tax slabs and “complex processes” under the GST regime. Trade unions in Kashmir, New Delhi, The Bharatiya Udyog Vyapar Mandal, textile dealers in Ahmedabad, local traders in Agra and many more extended their support to the protest against the implementation of GST. Traders across the country shuted down their businesses for a day on July 1 to protest GST rollout. The traders are against the implementation of GST in its present form. Congress and some other political parties also boycotted the GST launch as a sign of disapproval for the new taxation laws. Goods and Services Tax welcomed with strikes and protests by different trade unions across the country. According to the protestors GST is very complex in nature and have many issues with its implementation. There are several issues with the GST system and rates. Congress opined that India was “ill-prepared” for the implementation of the new regime. Congress also considered the use of the Central Hall for this purpose as inappropriate. The country undergoes a paradigm shift in taxation through the Goods and Services Tax (GST). The biggest concern of business community these days in the lack of clarity on the provision of the tax and the heavy penal clauses associated with cases of tax default. The theme of GST is ‘One Nation, One Tax’ as the Goods and Services Tax (GST) rolled out across the country, but Jammu & Kashmir stayed out from the theme ‘One Nation, One Tax’ raises the possibility of double taxation of inter-state transaction of goods going to the state since two levies — the Integrated GST (IGST) and State GST (SGST) of the originating state — will be imposed on all supplies to J&K, alongside local levies such as value added tax (VAT) and sales tax. Primarily being a consuming state, J&K is expected to benefit from the rollout of GST as it is a destination-based tax. According to a 2016 report on ‘Impact of GST on Jammu & Kashmir Taxation System’, prepared by the Institute of Chartered Accountants of India along with J&K government officials, the implementation of GST in J&K is expected to provide a gain of Rs 1,580 crore to the state as overall costs are likely to reduce and the state is likely to gain with GST on services. J&K needs to enforce both Central GST (CGST) and SGST Act due to the special status for the state under Article 370 of the Constitution. The central government had made an exception for J&K in the CGST Act in March this year unlike the draft version of the law where there was no such exception. The IGST Act also makes an exception for J&K. As per Article 370 of the Constitution, the power of Parliament to legislate for J&K is restricted to defence, external affairs, communication and central elections. However, the President may, with the concurrence of the state government, extend other central laws to the state and apply amendments made in the Constitution of India to J&K. The ruling BJP-PDP government failed to evolve a consensus on the GST rollout in the state. The Opposition voiced concerns regarding losing fiscal autonomy of the state if the central law is extended to the state without protection of J&K’s own taxation powers. In view of differences among the political parties, the state government had set up an all-party consultative group to build a consensus on GST. After consultations the government claimed that the parties were in agreement on extension of the new tax regime but with safeguards to protect the fiscal autonomy of the state. There is a need of an hour for the government of Jammu and Kashmir to build a consensus on the implementation of GST as soon as possible otherwise the failure of the state to implement the GST would lead to "adverse impact" of price rise and put the local industry at a disadvantage.