Its been almost a year since India rolled out the Goods and Services Tax (GST), its most ambitious tax reform yet. Adi Godrej, the chairman of Godrej Group, who has been a supporter of the tax right from the beginning, says the tax has been very successful and the proof of which can be seen in the increased economic growth.
India's GDP (gross domestic product) grew 7.7 per cent in the January-March quarter, its fastest pace since the government announced a ban on high value currency notes in November 2016. Speaking with THE WEEK, Godrej said that apart from boosting the GDP growth, GST has also helped on other fronts like bringing prices of consumer goods down.
“GST has done very well. It has added to India's GDP growth quite considerably. It has also led to a reduction in consumer product prices; the rates are lower than they were before GST, and it has increased revenues. So, on all fronts it has done well,” he said.
India's GST has long been criticised for having multiple tax slabs, unlike countries, which have implemented it having one or two slabs only. In India, there are six tax slabs – zero, three per cent, five per cent, 12 per cent, 18 per cent and 28 per cent. Additionally, a surcharge is levied on some products over and above the highest 28 per cent rate.
Godrej says that for a country as large and diverse as India, it would not be possible to have one rate for all goods, from daily needs to luxuries. He adds that the one nation one tax has only helped in speeding up logistics and supplies across the country.
However, he does wish that some of the goods that are currently in the 28 per cent GST slab, will be brought down to 18 per cent, which he says will further boost business and economic growth. The highest tax bracket should only be restricted for sin goods and ultra-luxury products, he feels.
The rollout of GST has not been without problems. For instance, exporters have faced delays in getting refunds. There had also been complaints initially of the technical glitches on the GST Network (GSTN) portal.
Godrej says regular meetings of the GST council in identifying and addressing some of the matters have helped iron out some of the “glitches” and only “minor” challenges now remain.
“Of course, there have been a few hiccups and glitches. But, I must say, the GST council has met often enough and provided early solutions to many of the problems,” he said.
GST should also help improve tax compliance in a country, where tax avoidance has been high.
“In the GST regime, it will be impossible to evade taxes. Those players who were earlier evading taxes will suffer,” feels Godrej.
Since the GST was implemented, there have been complaints of small and medium enterprises being hit hard. But, that too has been “exaggerated” said Godrej. The fast moving consumer goods to real estate and locks group works with thousands of small firms, be it suppliers, distributors and wholesalers and most of them had not suffered, he added.