Implementation of the Goods and Service Tax was a historic event that would go down in the History books that children and entire countries will learn from. Though the surface level looks all peachy and rosy, it is not so at the depths. There are certain levels that are facing the adverse effects of GST that can be corrected by minor tweaks. Now, it is understandable that just like a car requires constant maintenance, the economy of a country also needs constant maintenance to keep the performance stable and increase its performance.
Let us start by looking at the problems first and then the solution for it. There are two problems with GST if you look at it with a 360 degree view, but these two problems are causing the most damage. Surprisingly, it’s easy to solve these problems .
1.Fuel Price is not added in GST
This is by far the worse and the most degrading factor that is eroding the concept of GST from the inside like a parasite that does not only feed on the host’s energy but literally bleeds the host and kills it. With different states having different costs on Fuel, it is causing an imbalance in prices just like it did before, GST is not solving the problem of Different States Different Prices, it is worsening it.
Most educated classes know that the States lose a huge revenue, if the Fuel is added to GST and the states are not too keen to take that bold step of adding fuel to GST . The opposition is able to turn this very issue against the ruling party, and worse, the opposition can give it any color they wish.
Rather, why not ask one state to take that bold step? Like we say, “Tum Chalo to Karwaan Chale”. We need just one state to take the jump and that state’s data can be used as an example. The prices in that state would fall and the overall cost of living, businesses and industries would benefit, who would then become the mouth pieces of the ruling party to make others follow this model.
2. GST and steps of manufacturing
A common view of a common man when it comes to goods, is a simple 3 step process manufacturing, Distribution and Retail. However, the process is much more complicated than that. Manufacturing itself has 5 steps, research and development, sourcing material for development (several steps here too but is not hurting us much), raw material acquisition
(This again breaks down to number of materials being used in the product), transportation of raw material and manufacturing. This is the cause of concern for a lot of industries today because these 5 steps are increasing the cost of manufacturing. Even if you place the lowest slab of GST on it, i.e. 3% the cost increases 10 fold to just acquire the raw materials, let alone manufacture and move to the next step which is distribution.
Stop the Compounding of GST in its tracks, its bleeding the economy and include the parasite of Fuel Price it’s a deadly epidemic. The government will need to form a new grid just for manufacturing alone, which means the Goods would need to be separated from the Services. Bringing the slab to 0.5% to 0.75% for manufacturing and acquirement of raw material will not only solve this jamming process but will bring the Inflation rates down to Historic Levels. If you would like to take it one step further, the solution for it to add another grid for processing units, like agriculture and milk production to 1.5% to 2%. As the economy stabilizes these grids can be independently tweaked to suit the economy.