MUMBAI: Among the myriad developments that took place in the year gone by, if there is one that stands out in a league of its own, it is the roll-out of the Goods and Services Tax (GST) regime.
The new tax system came to force on July 1 and has since been one of the most talked about subjects across the country. Although it was one of the most awaited decisions by the government over the last couple of years, the manner in which it was rolled out gave rise to a heated debate.
The tax reform was first proposed by former President Pranab Mukherjee, who was then a Rajya Sabha member, way back in the 1980s. However, the first formal proposal was made by the P Chidambaram-led finance ministry in the 2006 budget and work on the formulation of reforms started under the current BJP-led government last year. GST was just 12 percent. When the workers complained that there was no way they could procure raw materials with this kind of tax rate in place and keep their business profitable at the same time.
Another issue that the regime faced in the initial few months after its arrival was low compliance. But what was new was the reason for this lack of compliance — confusion. No one seemed to know how to go about filing their taxes under the new regime, not even qualified chartered accountants with years of experience in handling taxrelatedmatters. And because the of this confusion, the government’s tax revenue for October fell to as low as Rs 86,346 crore.
The impact of GST on small and medium sized businesses and exporters finally convinced the government that a rationalisation of rates was in order. In October, the GST Council revised the rates on 27 products and set up a group of ministers to look into issues faced by these businesses.