After nearly two decades of gestation, India’s Goods and Services Tax is all set to become a reality in a gala affair hosted by Prime Minister Narendra Modi in Parliament’s Central Hall at midnight on Friday. The timing and setting of the launch, the same hall from which India’s first Prime Minister Jawaharlal Nehru announced India’s independence in a midnight speech 70 years ago, underlines the magnitude of the event and the significance the government is attaching to it.
The presence of movie star Amitabh Bachchan and singer Lata Mangeshkar, as well as industry leaders like Ratan Tata, means the event is more likely to live up to Modi’s event-management bonafides than echo Nehru’s iconic tryst-with-destiny speech. Yet the launch of the new tax, which replaces all other indirect taxes in an attempt to turn India into a common market, may be the rare occasion when the government’s claims actually match reality on the ground.
GST is a massive change for India. It fundamentally reshapes the way the Indian Union works, and required a Constitutional Amendment – only possible with the approval of a majority of state legislatures, in addition to Parliament – to become reality. It has involved the setting up of a GST Council, a unique institution that features representatives from the Centre as well as every single state, and is built on the presumption of a grand federal compromise.
Of course, not everyone has been able to understand exactly what GST is, especially since the original promise of one nation, one market, one tax turned out to be slightly more complicated than promised. The internet naturally came to the rescue, offering memes for those who were as confused as the rest of us.
But for those who actually want to understand what is going on with the GST, here are a set of pieces that break down India’s biggest tax reform:
- This explainer, from Abhishek A Rastogi and Rashmi Deshpande, gives you the basics of the indirect tax reform.
- While the original plan was to have as simple of a tax structure as possible, the final product features five slabs and six cesses, and that complexity could end up negating some gains, writes Mayank Jain.
- Turning India into a common market may not necessarily be a good thing, writes Shoaib Daniyal, who explains how GST will alter the relationship between the Centre and the states.
- M Rajshekhar traveled to Surat, Gujarat to get a sense of how businesspersons there are preparing for the GST rollout. He discovered that, while big businesses seem to gearing up for the new system, smaller players are starting to panic.
- Mayank Jain explains why, even though GST will be rolling out on Saturday, the technology that is supposed to back the new system is not yet ready.
Friday’s midnight event may be as well-produced as any of the Modi government’s event launches, but the big question will be what happens afterwards. The administration has gone around over the last few days reminding companies not to unduly raise prices, with inflation being the big concern of the new regime. The other major worry is the potential for technological glitches, as GST is built on an untested IT backbone.
But both those issues may be resolved over time, as India settles into the new tax regime. The real question will be the effect of GST on India’s economy – how it will alter the way business is conducted in the country, and the relationship between state and Centre. The Union Government has claimed that the new common market will spur off growth in the Indian economy, to the tune of several percentage points added to the Gross Domestic Product. We will not know how accurate those predictions will be for some time now, but the test begins on Saturday.
Limited-time offer: Big stories, small price. Keep independent media alive. Become a Scroll member today!
Our journalism is for everyone. But you can get special privileges by buying an annual Scroll Membership. Sign up today!