It faced a huge political backlash and became the butt of jokes with opponents calling it ‘Gabbar Singh Tax’, but weathered all of it in 2018 and its proponents are confident the GST is fast emerging as a strong tax compliance tool and may eventually evolve into a single-slab taxation rate. Dismissing the criticism that it was a ‘good law, badly implemented’, those in support point out it took two years for a GST to be implemented in Malaysia the last country before India to have introduced such a tax but only to be scrapped in the end by a new government there. In India, it has been about one and half years since the GST (Goods and Services Tax) was introduced in July 2017.
Confident that the new indirect tax regime has stabilised now, the authorities feel it is time to reap the benefits now and therefore the focus has shifted to enforcement actions, as also streamlining returns and refund processes. The GST, which replaced a tangle of local taxes and entry levies, saw a chaotic roll-out on July 1, 2017, following a decade of political debate but only three months of concrete planning. Like any reform, the GST faced its own teething troubles and the main opposition party Congress’s president Rahul Gandhi famously called it ‘Gabbar Singh Tax’ after the famous villain of all-time Bollywood blockbuster ‘Sholay’. The opposition parties vehemently criticised the new ‘one nation, one tax’ system having four different rates instead of a single rate adopted in some countries including the UK and Singapore.
Then there were concerns about an onerous reporting system and frequent policy changes disrupting supply chains, and in turn consumption, requiring first few months being spent on streamlining the back-end systems, educating businesses and finding appropriate slabs between 0, 5, 12, 18 and 28 per cent rates. It was finally in 2018 that the actual work on ‘one nation, one tax’ began to be seen with banishing of inter-state check posts with implementation of an electronic permit. By mid-2018, tax collections rose in a country where compliance historically has been low.The tax-to-GDP ratio, which touched its highest level of 11.6 per cent last fiscal, is expected to rise further to 12.1 per cent this financial year ending March 2019.