GST completes one year: How indirect tax reform helped India to fight poverty

By: | Published: July 2, 2018 12:43 PM

As goods and services tax (GST) completes one year since its introduction last year, a widespread makeover is being witnessed in the Indian economy especially on the poverty reduction front.

As goods and services tax (GST) completes one year since its introduction last year, a widespread makeover is being witnessed in the Indian economy especially on the poverty reduction front.

As goods and services tax (GST) completes one year since its introduction last year, a widespread makeover is being witnessed in the Indian economy especially on the poverty reduction front. India’s chances of fighting poverty have greatly improved with the introduction of the indirect tax, Manish Sabharwal of Teamlease Services wrote in The Indian Express. “India’s odds for sustainable poverty reduction have greatly improved with 47 lakh new formal enterprises from one year of GST — a clear disruption to the 64 lakh enterprises previously registered for indirect taxes in 70 years — because formal jobs change lives in ways that no subsidy can,” he said.

In short, formalisation of enterprises, especially formalisation of jobs, is driving economy currently. The questions may be asked about the real driver of this formalisation and even on the latest CSO data that showed 41.26 lakh new jobs were created in the eight months preceding April 2018 and 6.85 lakh in April, what holds significance is that formalisation is actually happening. And it is irrelevant whether formalisation is happening because of GST, enforcement, amnesty, thresholds, morality, demonetisation, employee preference, etc, said he.

“Besides GST, formalisation is accelerating because policy-making has finally made the leap from classical physics (discrete systems) to quantum physics (everything is interconnected). Higher wages need the higher productivity that comes from a long-term strategy of formalisation, financialisation, industrialisation, urbanisation and human capital,” he also said.

Furthermore, demonetisation, digitisation, and bankruptcy have set the stage for further formalisation of economy, he added.

Reducing cost of formalisation

“We must further reduce the costs of formalisation by creating competition for EPFO and ESI (their monopoly makes them the world’s most inefficient social security programmes), pass a single labour code to eliminate our regulatory sprawl (you can’t comply with 100 per cent of our labour laws without violating 10 percent of them), issue an Aadhaar-type number to enterprises (to replace 25 plus numbers issued by various go

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