GST to benefit consumers, curb tax evasion

Krishnanand Tripathi
File Photo: Union Minister for Finance and Corporate Affairs Arun Jaitley with MoS Santosh Gangwar and Chief Economic Adviser Arvind Subramanian at the17th GST Council Meeting at Vigyan Bhawan in New Delhi.

File Photo: Union Minister for Finance and Corporate Affairs Arun Jaitley with MoS Santosh Gangwar and Chief Economic Adviser Arvind Subramanian at the17th GST Council Meeting at Vigyan Bhawan in New Delhi.

GST – a common single tax for goods and services – that will cover all the stages of a transaction like procurement of raw material, production, sale and supply of goods and services in the country is expected to immensely benefit the ordinary consumers.

GST is designed to abolish the multiplicity and cascading effect of taxes. This essentially means that earlier consumers used to pay tax on the taxes already paid during the various stages of value addition of a product but this anomaly will be completely removed in the new system.

For example, a supplier who has already paid taxes on procuring the raw materials then in the earlier system there was no way to deduct those taxes while calculating the tax liability on the final product.

GST follows Input Tax Credit system that means if under the GST a particular product attracts 18% tax and the total value of all the taxes that have already been paid during the various stage of production and sale of an item turns out to be 14 per cent then all the intermediaries in the supply chain would get input credit to that extent.

The cumulative tax eventually paid by a consumer will not exceed the ceiling of 18%. It will immensely benefit the consumer as taxes on taxes already paid will be avoided.

Allaying the apprehensions of consumers, the central board of excise and customs, the nodal body to administer the GST in the country, said that it would be a boon for households.

CBEC said: “Eighty-one per cent of items will fall below or in eighteen per cent GST slab.”

It would equally benefit the government as all the suppliers in a supply chain will have to maintain complete records for the entire chain to avail input tax credit.

Speaking to the media just ahead of the formal inauguration the GST on Friday night, revenue secretary Hasmukh Adhia said:  “The new regime “will bring in transparency, help cut tax evasion and benefit honest taxpayers.”

This means  more revenues for the government. GST would substantially reduce the under reporting of turnover by the businesses and help curb generation of black money.

To protect the consumers’ interest, for the first time, the government has included anti profiteering clause in the GST law making it mandatory for the businesses to pass on the benefits in tax reduction to the consumers.

Tax authorities can impose penalty or even cancel GST registration of a business.  But these rules require clarity how the ‘commensurate reduction’ in the prices subsequent to implementation of GST is going to be calculated.