GST and the New Normal
Lately, a great number of jokes have surfaced on the internet demanding that 2020 be declared like a cricket match and let's just reset the clock and move on to 2021. It's safe to say, there aren't many fans of this year. From massive bushfires, volcanic eruptions, earthquakes, floods, tornadoes and cyclones to communal riots, blasts and from the past few months, a deadly virus with no cure on the horizon - 2020 is truly the year where everything is going horribly wrong.
Adding to the morbidity is the economic slump that has been quite the damper for businesses in the last few months. Industry expectations are always high from the GST council meetings and stakeholders of the new economic paradigm don’t just want tax recommendations from the Council, they are also seeking answers for reviving the economy. Yes, the Centre has announced and implemented a number of relief and reform measures through it's COVID-19 relief package; and while these measures will most definitely help businesses cope with the struggles of lockdown, one can’t help wonder what changes and reforms under GST could be implemented in the next era. One that will bring in what is being christened as the new normal.
Sector wise revival
Fundamental laws of economics dictate that demand almost always fluctuates due to pricing and while rate cuts are appreciated they don’t really benefit anyone in the long run. Generalised rate cuts won’t be able to leave a mark either simply because not every industry needs rate cuts and those who do need rate cuts that help them eventually stabilise not just stay afloat. It is important to prioritise relief and reform measures by sector. At present, sectors that need the most help are the ones whose supply is dependent on physical consumption - travel and tourism, aviation, cinemas etc. Additionally, if a revival package is designed for such troubled sectors, it needs to ensure that there are enough provisions to help them repay their obligations and also fund their business needs. An either/or situation won’t be enough.
Furthering the digital India cause
Digital India has been a part of the country’s vision for quite some time now and can be optimised to up consumption patterns. Measures including incentivising online consumption and reducing GST on goods and services sold online could also help boost consumption.
Expanding the scope of GST
The GST battle has been on for three years now and almost every time concerns are raised around reduction or increase of GST rates on goods and services. Instead of this rather vertical battleground, why not consider a horizontal expansion and bring more supplies under the purview of GST? The Oil and Gas Ministry has already submitted a proposal to bring the supply of natural gas, petrol, diesel, aviation fuel under the GST radar - this will not only help with revenue collections, it will also bring everyday supplies like natural gas and vehicle fuel under a uniform tax rate leading to a dramatic reduction in price. As per fundamental laws, consumption is likely to increase if this solution is implemented.
While these measures might not see immediate impact, they have the potential to go a long way in revolutionizing the country’s biggest indirect tax.
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