When the BJP government at the Centre introduced a central GST (Goods and Services Tax) seven years ago to replace widely divergent sales taxes levied by state governments, the initiative was widely welcomed. In the ancien regime, retail prices of goods varied countrywide, because state governments imposed diverse sales tax on goods, often leading to smuggling across state borders. Therefore, the idea of imposing a GST which would also levy a tax on services to augment the tax pool to be shared between Centre and states, was universally welcomed in the interests of price equalisation. Octroi, a tax imposed by municipal governments on all goods entering towns and cities was also abolished. Although the tax structure had the stamp of approval of the GST Council comprising the finance ministers of all states, it was essentially drafted by the bureaucracy, which drew up such a complex GST structure that it has massively boosted official corruption for which India has a globally infamous reputation.
On September 11, at a public meeting with Union finance minister Nirmala Sitharaman, a respected Coimbatore-based restauranter pleaded for a single tax on food items by citing the example of a bread bun which is exempt from GST but attracts 18 percent GST if cream is added prior to service. For plain-speaking, the businessman was forced to apologise to the minister because the interaction was broadcast on social media. Yet the plain truth is that worldover the GST or VAT (which is levied only on goods, not services) is levied under a single, or at best two categories of goods, and not four as in India. As a result, there is great confusion about the amount of GST chargeable for a huge number of goods and services, aggravating the burden of doing business. Moreover by threatening harsh penalties for misclassification or misinterpretation of complex provisions of the GST Act, tax officials are reported to be extorting huge sums from businessmen, most of whom prefer to pay up rather than resort to expensive snail-paced litigation.
That’s why India is ranked the world’s 93rd (of 180) most corrupt country in the Corruption Perception Index of the Berlin-based Transparency International.
