ON  GST

G S T –A Transformational Tax Reform by Shri.V.S.Krishnan ;Published by Academic Foundation ; Pages 192 ; Price Rs 990/-

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The author of this book, Shri.V.S.Krishnan, was “Present at the Creation” of G S T and had participated in many of the crucial G S T deliberations .He was also member of various Sub-Committees on G S T. Krishnan is a senior civil servant belonging to the Indian Revenue Service with wide experience in handling matters relating to Indirect Tax Policy. In the early part of his career he served as the Member of the Tax Research Unit, where he was associated with the formulation of four Union Budgets. He has worked extensively on improving the Compliance Verification system through contributions to the preparation of the Audit Manual (under a Canadian Project) and a Return Scrutiny model (under the Asian Development Bank). He was conferred with the Presidential award for his Distinguished Record in 1999. He was closely associated with the evolution of the G S T and was also Director on the board of G S T N.

The G S T is an audacious attempt at integrating the State and Central VAT into a G S T  which would span the entire spectrum of the Value Chain. The Chief  Economic Adviser waxed eloquently—“To have achieved this in a large and complex federal system of multiparty democracy, with a Centre, 27 States and 2 Union Territories of widely divergent interests via a constitutional amendment requiring broad political consensus, affecting potentially 7.5 million tax entities, and marshalling the latest technology to use and improve the implementation capability, is perhaps breathtakingly unprecedented in modern global tax history.” Its impact is multi-layered, ranging from tax behaviour to strengthening the federal polity to ensuring fiscal equity. 

The book is divided into three parts. The first part explores the evolution of the G S T story including the debates that shaped the G S T.

The G S T will face transitional challenges including the technical one of managing the  G S T N network which is the backbone of G S T.

The G S T N challenges in its complexity the Aadhar Project, which provided an identity number with biometric details for 1.25 billion Indians. Besides providing a common online portal for all businesses to carry out three core business processes—Registration, Payment of Duty and Submission of Returns, the G S T N will match more than 3 billion invoices of buyers and suppliers every month,

The origin of G S T lies in “ VA T”  which was a broad-based tax levied on commodity sales up to and including at least the manufacturing stage, with systematic offsetting of tax on commodities purchases as input against that due on inputs. V A T started as MANVAT or as Vat on manufacturing, but later expanded to goods and services and covered the entire value chain. Today because V A T taxes value addition in both goods and services it is also called G S T—“Goods and Services Tax”. The revenue efficiency of VAT is what makes it so acceptable. A very interesting quote on the efficacy of VAT is attributed to Jean Baptist Colbert, the Minister of Treasury of Louis XIV—“ The art of taxation consists in plucking the goose as to obtain the largest amount of feathers with the smallest amount of hissing”.

Analysing the evolution of G S T, the author quotes the Chief Economic Adviser—“The G S T will decisively alter the Indian economy for the better because the G S T symbolises Indian politics and democracy at its co-operative, consensual best.”

The G S T with the simplification of the return filing system would be truly evident compared to the pre—G S T system. The  G S T  facilitates the ease of doing business by digitally aiding the tax payers to complete the formalities for paying the tax. The creation of an on-line portal in the G S T N will remove the physical interface between the taxpayer and the tax administrators and create a tax friendly environment thereby also promoting the ease of doing business. 

The second part of the book is a detailed analysis of the implementation of G S T which proves that G S T is an opportunity and can translate into favourable business customs only when businesses can successfully marry business evaluation with business restructuring.

The final and third part is concerned with policy prescriptions for going forward. The G S T impact will be strongly felt by the economy. It will spur growth by lowering the cost of investment and by expanding the market.

Krishnan concludes that G S T is  a reform which will not only reorient indirect taxes in India but also strengthen the federal polity and nurture the idea of cooperative federalism

The book carries a Foreword by India's Finance Minister Arun Jaitley who declares“...Mr Krishnan had a ringside view of the evolution of the GST. The book is written in a very lucid and readable style...... a number of interesting  suggestions have been made from the policy perspective. I am sure that this book will be useful for both, the lay reader and the tax professional”.

There is a rich section of Annexures and Appendices that throw a flood of light on this complicated subject.

Anyone interested in understanding of G S T will have to read this invaluable document.

P.P.Ramachandran.

25/11/2018.