CHENNAI: India Inc is disappointed over the GST impasse, but tax experts say, the delay is a blessing in disguise for the economy. They believe, the government should redesign the GST Bill that’s acceptable to all states.
“The GST Bill right now is not ‘cooperative federalism’, but is ‘coercive’ in nature. Secondly, by excluding key sectors like electricity, alcohol, petroleum and real estate outside the purview of the Bill, GDP growth will be pretty close to zero, it could well be negative,” Satya Poddar, Tax Partner, Policy Advisory Group, EY told Express. Poddar co-authored the first working paper on GST, when the UPA government first mooted the concept in 2008-09.
He added that key sectors like petroleum and alcohol account for close to one-half of the country’s indirect taxes. “States fear loss of fiscal autonomy and hence there’s an extreme degree of discomfort. They are also demanding, autonomy to give exemptions. The government should introspect, and come up with a ‘Good and Simple’ GST,” he said.
Explaining the two aspects to approach GST, Poddar said, one can either opt to exclude key sectors from the GST or include all sectors and give freedom to states to opt in or out. “If you take out important sectors, it won’t help the economy at all as GDP growth comes predominantly by reducing tax from capital investment. Any sector taken out from GST will continue to pay tax on capital investments,” he said.
More sectors out of the GST purview means that the Constitution needs to be amended to bring them back and the exercise of stiff resistance from states will resurface. “Unwilling states can opt out and continue with their current tax structure. They can join in anytime and without having to amend the Constitution,” he said.