Gst will work fine don’t fret over transient glitches

Gst will work fine don’t fret over transient glitches

A marginal dip in the collections from the goods and services tax (GST) to Rs 90,669 crore in August from Rs 94,063 crore in July this year is no cause for alarm. A temporary dip, attributed largely to taxpayers using their transitional credit, is not indicative of a trend.

Reportedly, over three million taxpayers are yet to file their GST returns. Teething problems for industry were anticipated in the transition to GST. The Centre and states must quickly fix the glitches.

There is simply no case to damn the fundamentally sound tax reform to make production efficient.

GST subsumes most indirect taxes and captures value addition across the production chain. Audit trails are created when the manufacturer claims credit for taxes paid on inputs that help widen the tax base and curb evasion.

Collections will pick up once the glitches — such as difficulties for taxpayers in uploading tax returns and procedural delays in settling exporters’ claims for input tax credit that blocks their working capital — are fixed.

It does make sense, for example, to have an online forum for small and medium enterprises to raise their grievances. These can be resolved by the GST Council.

The need is to also converge GST rates to shore up collections. India has a four-tier GST structure with rates ranging from 5% to 28%, not counting the cesses.

The rates are too dispersed even within sectors. Take textiles. Synthetic yarn and fibre attract 18% GST, while garments attract the lowest rate of 5%.

The rate divergence is likely to lead to a build-up in input tax credit (that remains unutilised) for a garment maker especially if the value addition is minuscule.

The problem will be resolved when the rates converge — the same kind of product will not have differential tax rates. Expensive products purchased by the well-off, in any case, will bear a higher tax burden even if the rate of tax is the same as on a cheaper substitute. The need is to move to a clutter-free tax system.

The swift inclusion of petroleum and real estate in GST, and removing exemptions, will widen the tax base and help lower rates. GST is here to stay, the point is to fix the flaws and move ahead.