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Why Congress would want GST to be implemented by BJP only after 2017...

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Why Congress would want GST to be implemen


only after 2017
By Sachin Dave, ET Bureau | 30 Nov, 2015, 02.47PM IST

Let's start with some facts. No government across the world has been re-elected after they
implemented goods and service tax (GST). Not just that, the benefits of the GST were
always reaped by the succeeding government.
In India, all the earlier governments from the NDA led by Atal Bihari Vajpayee in 1999 to
UPA (1&2) led by Manmohan Singh had plans to implement goods and service tax (GST).
It's a surprise then that even in 2015; Narendra Modi has to go out of his way to woo Sonia
Gandhi and Manmohan Singh to support the GST Bill.
However, despite all the noise around the centralised tax being good for the economy,
Congress would want that BJP to implements the GST, but not before 2017.

However, despite

being good for the

implements the G

In the long run, GST could boost (and would boost in all probability) India's gross domestic
product ( GDP) by anywhere around 1.5% to 2%. Yet, there is a huge drawback of GST. In
the short runthat is initial two to three yearsGST would trigger inflation. Everything
from your groceries to your movie tickets would become more expensive by anywhere
around 5% to 8% (assuming GST is at 18% to 22%)

ET SPECIAL
this exclusive

So if the Congress manages to stall GST until 2017, there would be a spike in inflation till 2019. And the C
the BJP for the inflation and hope to score politically in the 2019 elections. After all it would be tough task
party to explain to the voters that the inflation is a result of GST and not mismanagement. Not just that, if b
manages to pull this off and form a government in 2019; even if it doesn't do much, the growth would start
2020.
How GST works:

Simply put, GST is a nationalised tax, which would remove all (almost) other indirect taxes. How it works is
levy a unified tax on all goods and services across India.

What this would mean is, whether you manufacture a car in Maharashtra or in Assam, the tax paid would b

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benefits of GST, which includes the unified tax regime across India and reduction of black money.

Currently excise duty is collected by the states where goods are manufactured and not where the goods a
some states keeps becoming richer by dishing out sops for manufacturers, while the poor states remain p
would be passed on to the states where the goods are purchased (or consumed) and not where the good

Also currently there are many different taxes; service tax, sales tax, VAT (value added tax), entry tax, enter
these taxes are administered by different administration and there is lack of communication between these
companies maintain a different account for sales tax, for excise and for income tax. These companies try to
minimum taxes. This is impossible under GST as there is a unified tax, hence tax collection would increase

Also the system would monitor those who evade taxes. "For every product manufactured there is going to
example, what are the inputs going in to manufacturing a chair? Leather how much, plastic how much, the

material is procured it would be mapped out what are the taxes paid on each of them. Once its manufactu
manufactured entire tax paid on the raw material would be credited back and only the final product would
value addition at every stage. Which means no one would be able to evade 100% tax as it's paid in stages
person caught evading the tax will have to pay five times the penalty. So the risk reward ratio will not favou
would police itself till the goods reach the consumer. And the government will have details of each tax pay
taxes paid on each stage along with a unique number allotted to the goods. So evading taxes would beco
chief operating officer, tax and national head, indirect tax, KPMG had told ET earlier in an interview.

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However, under the GST the manufacturers or those providing services (consultants, CAs etc) can also pa
(as all indirect taxes could be charged) including simplest costs like furniture bought or electricity bill. This
goods and services increase. This could lead to increase in costs. Not just that, for the whole tax system to
another takes time. Companies have to calculate their costs differently, manage their warehouses different
takes time and creates chaos.
Malaysia implemented GST from April 1, 2015 and has seen a huge jump (2.5%) in inflation.

Yet, the short term pain is outweighed by the long term benefits. As cost of goods and services increase, s
manufacturers and service providers. This means those with capital would want to invest more. In the long
and service providers compete for the same customers, the prices would come down, so would the inflatio
GDP and reducing inflation.
But to complete this circle; it would take anywhere between 2-3 years.
Will NaMo rise to the challenge?

There is a huge probability that if the BJP government implements GST by 2017, the inflation would increa
and they may chose to reject the BJP for the high prices.

Yet, starting 2019 the growth would kick start, jobs would increase and the black money would find its way
that BJP may not be in power to reap the benefits.

The huge question now is, would Narendra Modi and the BJP want this? To implement the GST in 2017 or
would definitely want this and would do everything in its power for this outcome.

In the past all the governments have stayed away from implementing GST for the same reason. But will M
the hero that India deserves? It's a long term game, over the short term pains, the future holds the answer
(Views expressed are personal)
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