A Case against GST and alternatives

Promise - Information available in the public domain makes the following claims in respect of GST:

• Broadening of tax base,

• Reduction of distortions in economy through a more comprehensive input tax credit,

• Enhancement of export competitiveness by comprehensively relieving domestic consumption taxes on exports,

• Ensuring greater regional equity by getting rid of inter-state sales tax,

• Having a destination-based tax,

• Help creation of a seamless national market by removing inter-state trade barriers,

• Reducing compliance costs for taxpayers by simplifying and harmonising tax structure and making administration uniform across states. (emphasis in italics and  underling supplied)

A query in this regard – Whether the tax proposals are progressive?

Answer lies in the negative bringing me to - Why can’t we as Indians (I’m thinking of us as the race which had nuclear bombs, planes and all kinds of contraptions which are not fathomable today i.e. in the times of Ramayan / Mahabharat) come upon tax innovation?, set the pace for the rest of the world, set a benchmark in implementing innovative, transparent and efficient tax administration / system (emphasis supplied). I realise, after introspection, that the answer to this quandary lies in us, as people. The varied janata / population given India’s density of population and the challenges that this in itself brings, let apart business putting in place complex tax structures involving a mix of free use and abuse of principles of interpretation of law, lacuna in legislation, vague policy which is miles apart from practice and lastly implementation which needs transformation of mindset and hence by necessary implication a radical tax policy, legislation and entire re-vamp of tax administration.

Why ape Europe / west and try to implement the ways in which they legislate, they administer and they make policies in the Indian text, context and sub-text when experience advises that apples and oranges are not comparable. It’s as if we (Indian’s) for some strange reason which alludes me are in awe of what the gori chamdi does. It’s not as if India, in the past has had a dearth of SAVANTS or in the present will ever have a brain drain, that figuring out for ourselves innovative ways to manage our taxes better becomes an attempt to ape the west/east and the rest of the world. Some suggestions do follow in this deliberation It’s not all negative, as some may choose to call it.

Present - The existing condition of India’s economy, given the morality of the general public, businesses and tax administration is evident from the paradox which the above vision, if I may call it that – promises. The present dispensation of indirect taxes when logically evaluated, what emanates is - Customs Act, 1962, Central Excise Act, 1944 and Finance Act, 1994 form the pool of Central indirect taxes apart from Central / State Sales tax levied on inter/intra-state sale of goods. All these levies except for customs are to be subsumed in GST (CGST, SGST & IGST) in addition to other levies. Presently law relating to Central in direct taxes have a semblance of being settled in the sense that the words, phrases, sections, etc., are in some state of inertia given decades of contentious litigation (most of which still finds place in Courts/Tribunals). Legislation is an exercise in which all and sundry are involved and pundits sitting in the north block ably added by the bureaucracy determine outcome of legislation. In other words lacuna in the name of certainty, deletion of benefit in the name of reducing distortions, insertions of more and more condition precedents for input tax credit, keeping refunds in a state of flux without appreciating that the interest cost would again fuel inflationary trends, distorting sectors by inadequate policies, legislations, and the like. All of the above are solely attributable to the sceptical  mind-set of the tax administration who still believes that they collect tax for the British. Investigations are abandoned for gratification and where it ought to start it stops. Umpteen instances where the Government to save face has had to retrospectively amend laws to the detriment of business in India as also for MNCs. I’m not for a moment, stating that all tax ill’s are attributable solely to tax administration, businesses are also equally to blame, it’s not as if one can expect in India that there is a lacuna in law and the business community brings it to the fore and plugs it before damage is done. Though, some naysayers may point out recent controversies created by the legislature and judiciary-there is no denying that fact. Aberrations would always be a part of the larger picture of chaos. Point being, that existing machinery of in-direct tax laws can fairly be said to be well oiled capable of exacting taxes (legal or otherwise) from its tax-paying denizens. The going thus far is more or less good and the law more or less settled. Give or take about 10 percentile points either way.

The Government (In-direct tax department) has its own way of functioning – it’s like the rest of India where people cannot fathom the Goan way of life – “sushegath” which equals “aram se” in Hindi. The departmental officers are in a comfortable position where show cause (kas in kannada means money) notices (SCNs) are issued periodically without taking a stand on the legality/tenability of the demand. It’s as if the department at some point of time lost it’s spine. SCNs are issued for heck’s sake and the justification is “I don’t want anybody pointing fingers at me.” Despite the outcome which is in no way linked to the tenacious officers APRs. More-so, since the seniors writing the APRs have also gone through the same rigmarole. No one takes a stand contrary to “higher powers.”

Intellectual dis-honesty is the norm and justifications ample, lest, it’s a hindrance to one’s promotion. To put it plainly never have I seen some government officer who is expected to serve the public actually serving the public, what is happening in the name of service is self-service and dis-service.

I have never in my life seen class divide as I’ve seen in the GOI (any department) where even if the occasion is republic day or independence day, the tea and snacks served to Class I officers and so on and so forth has to be at a different venue albeit in the same premises when compared with Class IV officers. It​ some-how perpetuates an aura of they are more important - a paradox in itself. 

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