GST and the rates conundrum
Apropos of Pratik Jain’s article “The cess confusion” (FE, October 21), it is true that the multiplicity of tax rates is inimical to simplicity. GST is perceived as the panacea of all ills of the current indirect tax system. It is claimed that GST would propel economic growth and may increase GDP by 1-2%. The precise rate structure, however, is going to be the crucial component of India’s most ambitious tax reform. It is historical that the design of GST is neither in the hands of the Centre nor the states. It has to be the outcome of the combined wisdom of the GST Council. The Council is to recommend (read, decide) to the Union and the states the rates including floor rates with bands of goods and service tax. Undoubtedly, a single-rated tax structure is ideal and most convenient to implement. But, sadly, it is not practical. Rate structure has to be designed keeping in view the general acceptability by those who bear the tax, the needs of revenue and the ease of compliance and convenience of implementation. The Council is also burdened with the task of ensuring that the rate structure should generate enough revenue to provide for compensation to the states for loss of revenue arising on account of implementation of the GST for a period of five years. Whether a rate structure would lead to revenue loss for the states would be known with fair degree of certainty only after it has worked. The task of the Council is difficult. Devising an initial rate structure is constrained by some uncertainties. It is also compelled to achieve different objectives, some conflicting with or competing against the other. The multiple rate structure—some subjectivity being unavoidable—and the idea of a cess deserve to be seen in this context. An outright criticism would be denying the age old dictum: best is the enemy of the good. Let the ‘good’ come first. GST must not be delayed any further.
This refers to the report “Surat diamond merchant Savji Dholakia gifts 400 flats ,1260 cars to staff as Diwali bonus; here’s his story” (FE, October 28). Such a generous Diwali bonus is unheard of, even within the multi-billion MNCs that make up India Inc. Normally, people get one month’s salary or a certain percentage of the salary as Diwali bonus. But this diamond company has set a new trend—flats and cars to performers. Will the big companies imitate this to buy loyalty from employees? Nowadays, everybody is asking for Diwali bonus, even if one is employed just before the festival season—say, a month before. Diwali bonus is considered as a right by all and sundry, which is irritating. Watchmen in cooperative housing societies ask for bonus from the residents, apart from the society, as a matter of right. Even a stranger like a courier boy asks for Diwali handouts. One ends up paying just to buy peace. Diwali bonus can also be in kind—like the custodial parent allowing the child to meet the non-custodial parent during Diwali. We should think of novel ways to give Diwali bonus,apart from cash and giftsThis is the best way to celebrate. Sadly, a corporate Mahabharata is playing out this festive season. Expect firecrackers as the Tata tussle progresses.
Deendayal M Lulla, Mumbai