GST - Nothing was right

• GST is and was a good idea implemented in many countries with some variations.
• It has the basic principle of one tax on all goods and services across the country unless exempted.
• Chief economic adviser recommended revenue neutral GST rate of 15% with merit based lower rate and demerit based higher tax making it a 3 slab GST, apart from exempted list.
• Modi & BJP mangled it beyond recognition with exempted list and 5 tax slabs (3% to 28%) with additional cesses and sin tax on cigarettes and with real estate, petroleum products & liquor retained outside the list. 
• While they campaigned it as revenue neutral, the truth is that it is designed to increase center's revenues while state's fear erosion in their revenues.
• It has also hidden intention of bringing in retail trade under tax net despite their lower margins made them vulnerable, compelling them to migrate completely into cash segment.
• GST was deeply flawed in concept, design, rate(s), exclusions, exemption limits, information dissemination, compliance procedure, infrastructure, preparedness, training and so on. 
• Worst is that service tax, which accounts for over 60% of revenues, was hiked from 15% to GST's 18% tax slab.
• Nothing about GST rolled out on July 1, 2017 was right.
• After 4 months of hasty implementation, the consequences are clear and situation is nothing short of disaster.
• SMEs worst effected; Micro enterprises thrown out of business; Many small manufacturing units closed their operation with no prospect of returning; family operated small enterprises struggling hard to survive; Medium enterprises cutting back on production & reducing work force; Medium enterprises borrowing additional capital for paying large amounts for professional help for GST compliance; GST dealers living in constant fear of tax officials.
• The diarchic rule 'pay first and claim refund later' affected (1) export businesses tax incentives blocked and (2) SMEs faced non refund of input tax credits in time, warranting mobilisation of  additional expensive working capital.
• Ignoring industry/businesses/tax practitioners suggestions and relying of bureaucrats for GST design and implementation process resulted in innumerable flaws causing hardship to small & medium enterprises, retailers and consumers.
• It is only when 'tax problem' worsened to become 'political problem' government woke up to fix the GST problems.
• The desperation is visible with many changes and deferments announced and many more to come soon. As on Oct 31, 2017, GST rules were amended 11 times with 27 reduction of rates, 7 prescription of rates, 22 exemptions, 1 waiver, and 15 extensions of time. Most were concerning SMEs.
• Commonsense returned into the heads of rulers only after 4 months of hardships faced by businesses and consumers. While tinkering of GST is going on, the truth is that there exist no quick fixes and, complete over haul of GST is beyond the comprehension of this government.
• With GST, Modi has resorted to constitutional impropriety of hijacking states autonomy, compromising constitutional principles for economic benefits based on majoritarianism and narratives. What is worse is that introduction of GST Bill as money bill in Lok Sabha depriving Rajya Sabha its right to reject.
• While GST is only transitioning into uniform single tax regime, Modi has resorted to high pitch campaign as a solution to resolve all the ills of nation and highlighted that commodity prices would come down. GST will only give benefits after 2+ years with initial economic disruptions, that too in the form reduction of reduced business to business expenses due to saving in logistics of their products. And Indian businesses are notorious to pass on increased expenses to consumers promptly and retain any savings with themselves. Therefore GST offers no benefits to consumers. On the contrary, GST resulted in increased prices to consumers and lessened revenues to government.
• The deteriorating economy is reflected by the fact that central government has exhausted over 90% of its fiscal deficit target [3.2% of GDP for full year] in the first four months and some states choosing cut capital expenditure as a consequence of farm loan waiver expenditure. Due to low oil prices of $40-45 per barrel since 2014 continuously, central government has managed to contain its fiscal deficit but the combined deficit of the center and states has still remained at near 7%. India’s trade deficit widened due to slow down of exports while imports spiked after demonetisation.
• Now it is clear that centre underestimated impact of GST transition in terms of hit to the growth and how long the dampening effect that could last. 
• The Economist observed --  the shambolic implementation of GST is likely to make matters worse than demonetization. The BJP is not interested in policy it offers. It offers voters mainly distraction.
• The GDP growth rate declined in six quarters from 9.1% to 5.7% is a fact. Every 1% GDP growth loss means loss of 1 million jobs. Since many businesses have closed down and millions lost their jobs, improving the economy and GDP growth would be painfully slow. Unfortunately oil prices now crossed $62 per barrel and OPEC restricting production could see its price moving further northwards which impacts our GDP growth as well as job creation. 

Service Tax increased from 15% to 18% immediately after passage GST bills.

The cash starved Modi administration, has simply raised Service Tax from 15 to 18% w.e.f. July 1, 2017, the date GST comes into force indicating many more tax increases to follow. Inflation would become run away and poor & lower classes will be hard hit. No explanation or justification for this steep rise. All the time prior to passage of GST bills - Modi, Jaitley & Co maintained that consumer prices will come down and simultaneously govt revenues will go up due to GST pushing up consumerism, but now after these bills are passed Modi & Jaitley made somersaults by announcing service tax steep increase through the mouth Revenue Secretary. This indicates their mismanagement of nation's economy, least regard for laws of the land, misuse of discretionary powers vested with executive.

The following are remedial measures to curb executive power abuse:

• No expenditure shall be incurred nor tax shall be levied without prior legislative approval.
• The only exception could be while dealing with war like situations or natural calamity or disaster relief operations.
• Budgets must be realistic and deviations must be quantified, explained and justified.
• Any additional expenses or levies must be in public interest with justification & reasons fully explained and must be based on experts detailed studies and reports suggesting such expenses or levies are in the best interest of nation as a whole especially poorer & rural people.
• Additional levies during middle of the year just to fill revenue & expenses gaps must be prohibited. Higher tax compliance and reduction of wasteful & expenses should always be explored first.

Democracy in its true spirit is rule by people.

Autocracy is rule by a single person with absolute powers.

My View:

Modi attempting large scale fiscal reforms only to appease FIs will only disturb on going economic activity, create confusion & chaos and could lead to economic destruction as well. Modi's aggressive attempts devoid of merit & justification only indicates his lust for propaganda and playing wild gamble without understanding or mitigating risk of what he is doing and how it will impact common man is nothing but suicidal for the nation's economy. Sanity of mind must prevail to ensure ongoing economic activity is not disturbed or destroyed and confusion & chaos must be eliminated no matter what it takes or costs. The prime principle of democracy is that no innocent person should be troubled for what ever is being done in the name of reforms and for intangible & unquantifiable future benefits, must never be ignored. Needless to say that Modi's wild dream of turning 'under developed India' with 120 crore population into a 'developed nation' by 2020 is simply unachievable and hurry will only end up in confusion, chaos & destruction.