GST Gets Haribhakti’ s Hari Butee
Rtn. Shailesh Haribhakti was grateful to be the ‘opening batsman’ for the new president; a well chosen analogy, considering that he was the first speaker to inaugurate the new term, and that the inauguration took place at the Cricket Club of India.
He was invited to speak about the Goods and Services Tax and give everyone a “flavour of what the GST is likely to deliver,” – which was just another day at work for him, as a financial advisor to multinational organisations.
As Rtn. Shailesh Haribhakti served as president of the Rotary Club of Bombay a few years ago, the occasion boasted a certain kind of intimacy, the kind that makes it an honour for any speaker to address a room full of rotarians. Furthermore, as many rotarians have previously acknowledged his unswerving optimism during their interactions with him, it was not a surprise to view his idealism at the fore when discussing what he termed the “Game-changing Sustainable Tax.”
There is no better example of this than his conjecture on what the Finance Minister’s speech would be in 2020: “India’s GDP last year touched 3 trillion USD; Our fiscal deficit sank to 1.75%, largely backed by extreme buoyancy in revenues, which when combined with the massive disinvestment proceeds we got from Air India, has resulted in [a] complete transformation of India’s financial landscape. The tax to GDP ratio has this year turned out to be 22%, [and] the number of registrations for GST has touched 6.5 crores. When we started out the GST process in 2017, we expected no more than 60 to 80 lakh registrations, but as people realised how facile it is to be a part of this whole process, even the small, less-than-20-lakhsturnover businesses wanted to be part of this whole thing.”
Let us run through the numbers that Rtn. Haribhakti defined in what many would call a rather bold conjecture. The 6.5 crores of registrations that he referred to is the current number of enterprises in India, and according to him, “there is no reason on earth that everyone wouldn’t want to be part of this simple system.” In three years, not only did he expect the country’s GDP to rise from 2.1 trillion USD to 3 trillion USD, but he also concluded that the tax to GDP ratio would be nothing short of 22% – despite being aware of the fact that the EU has a ratio of 43%, and that India currently stands at only 12%.
However, he backed his deductions through a powerpoint presentation. Here are a few of the aspects that helped the Rotarian conclude that the GST is “a spectacular achievement”.
At the very start, the “offsetting of the erstwhile service tax.” While the cascading effect of the indirect tax has already been eliminated to a great extent, the GST further ensures the elimination of service tax against other indirect taxes. Therefore, there will only be a tax on the value that a business earns. This will be tracked by the GSTN network once a business uploads its invoice, enabling them to calculate the offset. So that’s good riddance to filing returns!
Moreover, a fact that the media has not thrown light on: the GST creates a level playing field for domestic and international manufacturers, which is expected to lead to growth in India’s economy. Previously, the Indian manufacturer had to pay both indirect and direct taxes, as opposed to those who would purchase goods from overseas, do a little processing, and sell in India. These suppliers only incurred the SAD (Special Additional Duty) tax. Thus, the GST now ensures that 50% of all manufacturers are bound by a 12% tax rate.
He was also confident that after the GST rates are applied – 18% and 12% on 60% of all goods and services in India; 20% applies on 30% of all goods and services – state revenues are guaranteed to rise.
The one point that Rtn. Haribhakti reiterated, was that the GST is a tax on the supply of goods and services, as opposed to a tax on production. “All those concepts are over,” he stated. Therefore, once the GSTN network receives a business’ invoices, the paperwork is completed; no more hours of documenting and filing forms, applications, and other documents.
As for the days leading up to the 1st of July, when the tax policy was first implemented, markets were receptive and accepting, giving the tax reform a “big thumbs up.” But that is not the only positive outcome. As Rtn. Haribhakti stated, “the facts that 22 checkposts have been dismantled and all other checkposts are going to be dismantled” are something that will benefit not only the manufacturers, but consumers as well. Besides, an economic outlook has become necessary to perceive the future, because any form of speculation about whether or not the GST will affect prices can only be affirmed by “whether or not you can manufacture and trade in a facile manner.”
“In conclusion, change is never easy,” said Rtn. Haribhakti. So while we marvel at the IT-enabled progress that the GST has brought about, those who will have to adapt might face a little struggle. However, it is a struggle that will make India a single market, and a market to reckon with.