Our Tryst with GST* – * Conditions apply!!!

GST – The Good and Simple Tax, as our acronym lover PM touted during the launch on 30th June is finally a reality after almost 11 years of intense labour. This along with FDI in retail must count among the most awaited reforms in India by India observers.

So, the advent of a single tax which subsumes, at last count, some 17 different taxes and myriad cesses certainly must count as the single largest Tax reform undertaken in India. Not to forget the application of tax only on value added in the chain. Along with this simplification, the fact that goods from one state can pass thro different states without wait, harassment and accompanying corruption portend a new beginning for trade in our country. In the pre-GST era, logistics and warehousing strategy of companies have been dictated by tax compliance rather than supply chain considerations. In the sense, the number of warehouses and their size would be driven by billing point concerns rather than geographical spread of demand. In the GST era, warehousing will depend on supply and demand equations and not taxation points. And hence like in most developed countries, companies will get to run larger, integrated and fewer of warehouses. Development of more efficient logistics hubs, warehouse consolidation and ensuing FDI will become a reality soon. This is a new dawn for retail, supply chain and logistics industry.

So with all the seemingly obvious benefits of the GST regime, why is it that there is still some cynicism and negativity from different quarters about the move? Why is P. Chidambaram once the prime mover of GST when UPA was in power, cautioning all of us to “Get Set for Turbulence”? The GST in the current form is nowhere close to the one which was originally conceived. Rolling stones probably gather no moss. But a rolling GST gathered whole lot of moss on its way from the wisdom of empowered committees to standing committees to GST council. The current version of GST is a product of what I call “co-operative federal bullying”. The result is instead of the One Nation, One Market, One Tax premise, what we have is One Nation, One Market, One Tax name, 3 Sub Tax names, Multiple Rates, Few Exceptions, Some flexibilities and with an *. * – Conditions apply.

Being part of the GST council, the states in their own wisdom, ensured that we as a country don’t get away with a simplistic tax which may throw many Chartered Accountants out of jobs. However, I understand that without having a set of different GST rates (in some cases different rates for the same category as per user segments) or without excluding items like Petrol, Alcohol, Real estate,.. consensus could never have been built in getting GST off the ground. UPA’s failure to make GST a reality during their regime stems from this. So the choice before the centre was to accept what the states demand and bring about a not so ideal GST or wait endlessly for a few more years may be decades before some major economic crisis forces all concerned to come to an agreement on the ideal GST. From that point of view I agree with the stand taken by the Govt. to bring in GST in its present form with its shortcomings, with a hope of ringing in the changes in the coming years. Kudos are in order hence.

The Congress party which at every opportunity reminded us that the seeds for GST in India were sown by the UPA, however, chose to be petulance personified and boycotted the GST launch. While rubbishing the GST in its present form its main “anGST” against GST was that it is being rushed thro and should be delayed by 3 months till September. We all in India know that in our country whatever may be the preparatory time available, things get accomplished at the last minute. If we get more time, we stretch our deadlines accordingly. That if we have more time, we will be more prepared and can do trial runs before actual roll out,.. exists only in theory. Don’t we see in our Indian weddings, folks tying up some loose ends literally till the baraat arrives and continue to do so as the wedding is in progress?  Finally when the wedding gets over, its smiles all over.  So even after the GST roll out, there will be glitches, teething problems and surprises which I am sure we will find ways and means of getting over. Pushing back by another 3 months is not going to make things any different.

It must be commended that this Govt. stuck to the date of July 1. It would have been very easy for the PM and the Govt. to throw in the towel and put off the launch by a few months. But then, there are other implications. Come Oct. it is the peak festival and hence business season in India. Does It help if the roll out happens when India is in the midst of its biggest Annual economic cycle? Will it help if GST is launched in Jan. in the final quarter of the fiscal year???

The ruling party, the BJP counts traders as its important traditional support base for the party. That the party still decided to go ahead with the tax reform which professes maximum disruptions for this group is a significantly courageous move.  In India economic reforms have always been carried out under duress; when push comes to shove. The heralding of GST must be the 1st major economic reform brought in when not under any kind of stress but just to ease up things for the future. This certainly conjures up the arrival of Acche Din for our country.

Still our penchant for complicating things comes to the fore here as well.  Though the GST collections have to be shared between the state and the centre, could it not have been done at the back using technology rather than coming up with 3 variants like SGST, CGST and IGST??? Does the Anti-profiteering clause make sense? Will not competitive economics eventually drive pricing??

GST is indeed a Good and Simple Tax. So there is nothing like a good or better time to introduce the same. But, we should not forget that this is India and we are Indians. So, conditions apply.

#GST is done, now work on GST-II

Finally the GST (Goods & Services Tax) in India is done if not dusted yet after being in the works for a decade.  From a foreign investor perspective, GST and FDI in Multi-brand retail are the initiatives that bracket India as a perennial “Work in Progress” economy.  Now is the time I believe to give a crack on another GST – “Good & Smooth Traffic” that is.

Traffic 2

Consider the situation in all the key cities of India today. In Delhi/NCR as I personally experienced last week, it just took one shower for an hour or so to bring Gurgaon oops Gurugram on its knees.  From the Delhi airport to the end of Gurugram took me 4 hours on a week day evening that too when it was supposedly against the traffic. I was lucky. The subsequent days it took more than 6 hours I was told. The CM had to do an aerial survey to understand the gravity of the jam!

In Mumbai these days you have traffic jams everywhere. In the so called freeways, Expressways, main roads, arterial roads, streets, gallis,.. everywhere.  Yes, in the air too. Flights departing out of and landing into Mumbai post 6 pm are routinely delayed due to air traffic congestion! And as I found today, even supermarkets are not spared of mammoth traffic. The space between racks are choked with oversized trolleys and sea of people that negotiating your way out is worse than Mumbai roads. I see this routinely in the neighbourhood supermarkets every weekend and sometimes on weekdays even. (Based on this, one is inclined to believe that “Achhe Din” have indeed arrived for the Great Indian Middle Class!!!).  Year after year during monsoons in Mumbai, the city resembles a Moon’s surface. May be it rains potholes!! For the Aam admi, every day it is “one small step becoming a giant leap” (as the pot holes are so big, deep and wide). For the city of Mumbai, Niantic the company behind the latest craze in town – Pokemon Go is better advised to go with a modified version “Pothole Go” which could be a runaway hit but slowed by traffic jams.

Ease of commute to work has become the single biggest hygiene factor these days for candidates when they seek a job. So much so, recently in a job interview the candidate asked me if we would anytime shift the office from current location and if yes, will it be still in the vicinity!! It is completely understandable I guess. With commuting and whatsapping sapping a lot of one’s time these days, “me time or family time” is on the shrink.

In India’s Silicon Valley and IT capital, “going live today” has a different meaning these days which is – atleast moving ahead in traffic while on the road. In peak hours it doesn’t matter where you are going and from where. Couple of hours on the road is a given. Columnist and now MP Swapan Dasgupta once tweeted “The unending journey from the airport to anywhere in Bangalore…” I would replace the words “the Airport” to “anywhere” now. The city missed a few crucial years in development when IT was on fire. Today, it is facing the heat of that miss.

In Chennai, if the Govt. spends one tenth of the money the parties spend on posters on building flyovers over key junctions, the city will be a different place to live. I am told that a 30km stretch of OMR (Old Mahalipuram Road) has only 11 signals!!.  Besides the myriad engineering college buses and IT companies transport vehicles, you will be lucky if you get some space to move your humble two wheeler.

In all these cities, the common story is of exponential growth with infrastructure not keeping pace at all. More often than not, a project planned today with certain expected growth in traffic becomes obsolete by the time it is commissioned as it usually takes 3 times longer time than planned. A very good case in point is the Chembur-Santacruz Link road in Mumbai which was opened amidst much fanfare and talk of smoother East- West connectivity and how one can reach the airport from Ghatkopar in 15 mins. 3 years after commissioning its already bursting at the seams. And in all these cities, there is very limited scope for road widening or expansion anymore. So this naturally calls of holistic planning with alternative modes of transport (like Metro) and also project conception and execution today with 25 years hence traffic in mind.

Ease of Traffic which essentially means less time on commuting has to become a National charter now. It won’t be too far when along with Bijli, Sadak, Paani and Bandwidth – Roadwidth gets into the National discourse during elections. So from a political perspective as well, focusing on less traffic on roads will become a game changer in the future. And the party which appreciates that and works on the same gets to reap the dividend. So I urge that the present Govt. to start work on “GST-II” asap. Just like how the central govt has to work jointly with the states for a smooth roll out first and then implementation of the GST reform, on the traffic also the Central Govt. must work with the states to give this a high priority work to a plan in all the key cities.  And like how “One nation, One tax” is becoming a reality considering India’s highly complicated historical tax regime, “Single nation, Smooth traffic” will soon become the need of the hour if not it is already.

I am not sure if the Minister for Road Transport and Highways Nitin Gadkari’s children are politically inclined. I would presume so. If he starts work on this idea of a GST-II bill now, most likely it would become a reality during their time!!!