It is more than just a tax.

The Goods and Services Tax, or GST, is a "modern reform implemented with archaic sarkari attitude", thinks C Bhagat. When Bhagat, with a business degree and a decade's experience in an investment bank, is unable to understand how to calculate GST what hope is there for a person, who has passed school but never been to college? People have tried to explain how GST works. For services it is a flat rate of 18%, but for manufacturing, tax paid at the previous stage is deducted while submitting tax for the next stage, thus avoiding tax on tax. What is the problem? There are too many rates and extra cess has been added on items considered luxury or sinful, 3 returns have to be filed every month, and figures of all the stages have to match exactly with each other or they will be rejected. This gives enormous powers to tax official and with it the scope for extra income under the table. The structure of GST is contributing directly to a slowdown in the growth of the economy, wrote Prof I Rajaraman. Previously, a retailer would return unsold goods to the supplier after a certain period of time and pay him only for goods sold. With GST, suppliers are refusing to accept returns because the process of claiming refund of tax already paid is so cumbersome. Retailers are therefore reducing their inventories, thus reducing the entire manufacturing chain. There is difficulty claiming input costs if some suppliers are too small to be registered with GST. GST will hit the informal sector, which constitutes 94.6% of our non-agricultural business establishments, wrote M Chakravarty. This sector was supposed to wither away as the economy developed, but it has persisted as a low paid refuge for the poorly educated unemployed. Many industries in the formal sector source their supplies from them because they are cheap. Big businesses are celebrating. Why? Because without competition from the informal sector they can increase prices. But that will reduce consumption. Already consumption is down because of increase in the price of oil and a fall in the number of jobs, wrote J Rodrigues. The government should "not have the attitudes of India in the 1960s. Which are (a) profits are terrible; (b) all businesses are run by crooks who we have to catch red-handed; (c) running businesses is no work, so people can sit around and do returns all day; we are government, so all businesses are beneath us -- we tax guys being colonial lagaan collectors for these uncouth thieves," wrote Bhagath. Politicians and big business are in cahoots, so they know each other, higher taxes are needed for social schemes to win elections, and the middle class needs to be kept under control. Will GST succeed in all this?