Essay Example on GST will not raise growth will push up consumer prices Inflation









GST will not raise growth will push up consumer prices inflation and may not result in increased tax revenue collections There appears to be certain loopholes in the proposed GST tax regime which may be detrimental in delivering the desired results They are India has adopted dual GST instead of national GST It has made the entire structure of GST fairly convoluted in India The centre will have to coordinate with 29 states and 7 union territories to implement such tax rule Such regime is likely to create economic as well as political issues The states are likely to lose the say in causal rates once GST is implemented The sharing of revenues between the states and the centre is still a matter of contention with no unanimity arrived regarding income neutral rate Chief Economic Advisor Arvind Subramanian on 4 December 2015 suggested GST rates of 12 for concessional goods 17 18 for standard goods and 40 for luxury goods which is much higher than the present maximum service tax rate of 14 Such initiative is likely to push inflation The future GST construction is likely to succeed only if the country has a strong IT network It is a well known fact that India is still in the budding state as far as internet connectivity is concerned Moreover the proposed regime seems to ignore the developing sector of e commerce E commerce does not leave signs of the business outside the internet and has anonymity associated with it As a result it becomes almost impossible to track the business transaction taking place done internet which can be business to business business to client or customer to consumer 

Again there appears to be no clarity as to whether a product should be considered a service or a product under the concept of E commerce New techniques can be developed to track such transactions but until such technologies become readily accessible generation of tax revenue from this sector would continue to be uncertain and much below the expectation Again E commerce has been insulated against taxation under custom duty moratorium on electronic transmissions by the WTO Bali Ministerial Conference held in 2014 Communication is considered to be necessity and one cannot do without communication In modern times communication has assumed the dimension of telecommunication The proposed GST regime appears to be unfavourable for telecommunication sector as well Lone of the major drawbacks of the GST regime could be the direct spike in the service tax rate from 14 to 20 22 GST Impact on the Telecommunications Sector in India The proposed GST appears to be silent on whether telecommunication can be considered under the category of goods or services The entire issue of telecommunication sector assumes a serious proportion when India s rural tele density is not even 50 The proposed GST regime intends to keep petroleum products electricity real estate and liquor for human feeding out of the purview of GST It is a well known fact that petroleum products have been a major contributor to inflation in India Inflation in India depends on how the government intends to include petroleum products under GST in future

Electricity is essential for the growth and development of India If electricity is included under standard or luxury goods in future at that moment it would badly affect the development of India It is said that GST would impact negatively on the real estate market It would add up to 8 to The cost of new homes and reduce demand by about 12 The proposed GST regime would be capable of being levied on sale of newspapers and advertisements therein This would give the governments the access to substantial incremental revenues since this industry has historically been tax free in its entirety It sounds ridiculous but the provision of GST is likely to make the supervision of operations by its Board senior managers across the company's agencies in different parts of the country a taxable service by allowing each state to raise a GST demand on the company Again there appears to be lack of consensus over fixing the revenue rate as well as threshold limit One thing is for sure services in India are going to be steeply costly if GST is fixed above the present service tax rate of 14 which in turn will spiral up inflation in India Asian countries which implemented GST all had witnessed retail inflation in the year of operation CONCLUSION The proposed GST regime is a half hearted attempt to rationalize indirect tax structure More than 150 countries have implemented GST

The administration of India should study the GST regime set up by various countries and also their fallouts before implementing it At the same time the government should make an attempt to insulate the vast poor population of India against the likely inflation due to operation of GST No doubt GST will simplify existing subsidiary tax system and will help to remove inefficiencies created by the existing current heterogeneous taxation system only if there is a clear consensus over issues of threshold limit revenue rate and inclusion of petroleum products power liquor and real property Until the agreement is reached the government should resist from implementing such regime

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