Ground Scorching Tax

by Arun Kumar

On 1 July 2017, Goods and Services Tax (GST) became a reality. The government hailed it as the biggest tax reform of independent India which would herald a new freedom for the nation and unify it with 'One Nation One Tax'. Some of the claims made by the government were that GST would bring about ease of doing business; increase tax collection; lower inflation; increase GDP growth by 1-2 per cent; and check the black economy. More than a year later, we have more questions than answers.Why did the economy slow down?Is the government likely to collect more taxes?Why have prices continued to rise?Why has Malaysia withdrawn GST?Turns out that problems with GST are both transitional and structural. To correct for these there have been a few hundred notifications and orders from the government which have added to the confusion.In this book, well-known economist Arun Kumar explains the reality behind GST. Known for not pulling any punches, the author explains why GST is a double-edged sword for the common man, why it will increase inequality across sectors and regions, why it will hurt small businesses-everything the government does not want you to know.

366 pages, Kindle Edition

Published February 7, 2019

Reviews

[Sanjay Banerjee · Rating 5 out of 5]

The author, an acknowledged expert on Public Finance and Black Economy (also teaches at JNU) explains the structure of Public Finances as they relate to the Indian Economy and the GST as implemented. Simple and easy to comprehend - ideal book for a layperson like me! He explains the systemic defects as well as his suggested solution is also provided in the final chapter.

[Appu · Rating 3 out of 5]

The Goods and Services Tax is a value added tax that covers all goods and services. When introduced in 2017, it replaced 17 taxes of the states and the Union. The Government of India calls it the "good and simple tax", that did away multiple tax rates across states and hindrances to the free movement of goods across the country. It claims that through the system of input tax credit (ITC), the cascading effect of taxation will be avoided and indirect taxation will become less onerous and distortionary.
Arun Kumar, the author has a different take. He dubs it the Ground Scorching Tax, a play on the acronym of tax.
Kumar argues that by relying on GST and excise, indirect taxes, inherently regressive, the government is giving fairness in taxation a short shrift. He argues that GST is a very complicated tax and compliance requires high degree of accounting competence and IT support. This pushes the most vibrant sector of the the Indian economy, the small and marginal sector, into the sidelines. the GST Act entities with turnover unto 20 lakhs from registration and those with turnover between 20 lakhs upto 1.5 crore can opt for a composition scheme. But they cannot claim input credit, cannot undertake inter-state trade and cannot give input credit. These ensure the marginalisation of the MSME sector and the triumph of the organised sector
Solution, a taxation system where direct taxes pay a predominant role. Bring the black economy, which the author claims constitute 65% of the economy, to light. This will ensure tax buoyancy which will allow the government to limit GST to luxury goods and substantially reduce excise duties.

[Prithvi Joshi · Rating 3 out of 5]

The book tends to get technical at times and lacks structure. However, it is a good read for people with some basic knowledge of economics as well as indirect taxes.