THE HINDU Editorial Vocabulary-July 1, 2017- Topic 1

Midnight makeover

Adoption of GST

In a landmark reform, India today switches to a new indirect tax system, the Goods and Services Tax. The GST subsumes the multiple Central, State and local taxes and cesses levied on goods and services, unifying the country into a single market, thereby making it easier to do business and ensure tax compliance. This will attract investors and more efficiently mop up revenues for the exchequer. The reform has been years in the making, and having shown the political will to finally pull it off, the Central government must work with the States to chart a road map to simplify the tax regime. 

Currently there are multiple tax rates ranging from 0% to 28%, plus a cess on some products, creating incentives for lobbying and rent-seeking. The level of preparedness for the new tax system too is not optimal, with sections of industry, trade as well as the bureaucracy visibly anxious about several aspects of the GST’s operational and legal framework. In response, the date for businesses to file the first GST returns has been deferred. The generation of e-way bills for moving goods worth over ₹50,000 too has been put on hold, along with the requirement for e-commerce portals to deduct tax at source from small sellers. The GST Network, which will digitally capture billions of transactions daily, was not able to test its software in advance; and there is concern about the preparedness of intermediaries mandated to help businesses transition to the completely electronic compliance system. The coming days therefore could test the system, and the capacity of the authorities to think on their feet will be vital.

As it stands, the GST in its initial avatar has a complicated structure, with far too many tax rates that could lead to classification disputes, and with the exclusion of key inputs such as petroleum products (with particularly high indirect tax levies). The Finance Minister has asked industry to ensure that the benefits of GST rate cuts are passed on to consumers, but it is not clear how businesses with higher tax incidence are to adjust pricing strategies or how the stringent anti-profiteering clauses will be interpreted. The transitory effects on India’s largely informal economy, which has already been hit by demonetisation, must be watched closely. Tax buoyancy, an easier investment climate and the 1% to 2% growth spurt expected from GST may take some time to be realised. Yet, reforms are the art of the possible and the government has said it will strive to rationalise the number of tax rates and bring excluded sectors into the GST over time. This is the first step in the evolution of the GST, and some initial hiccups are perhaps inevitable in a system founded on political consensus and federal adjustments. This is why it is unfortunate that some opposition parties, including the Congress which led the initiative on the GST for much of the past decade, decided to boycott the midnight inauguration in Parliament’s Central Hall.

Http://video.thehindu.com/thehindu/8137GST-the-impact-1.mp4

Vocabulary

Subsume: include or absorb something in something else.

Example: Most of these phenomena can be subsumed under two broad categories

Compliance: the action or fact of complying with a wish or command.

Example: They must secure each other's cooperation or compliance

Exchequer: a royal or national treasury.

Example: The most important post in judging the character of the government is its finance minister and chancellor of the exchequer

Incentives: a thing that motivates or encourages one to do something.

Example: There is no incentive for customers to conserve water

Synonyms: inducement, motivation, motive, reason, stimulus

Anxious: wanting something very much, typically with a feeling of unease.

Example: The company was anxious to avoid any trouble

Synonyms: eager, keen, desirous, impatient

Compliance: the action or fact of complying with a wish or command.

Example: They must secure each other's cooperation or compliance

Transitory: not permanent.

Example: Transitory periods of medieval greatness

Synonyms: transient, temporary, brief, short, short-lived

Strive: make great efforts to achieve or obtain something.

Example: National movements were striving for independence

Hiccup: a temporary or minor problem or setback.

Example: Just a little hiccup in our usual wonderful service