A Firm Hand On The Till
If I were to describe the Goods and Services Tax (GST) in one line, I would liken it to a foolproof blockchain technology which records transactions along the chain from production to consumption. The GST is a consumption tax and every link in the chain will have to be accounted, so tax compliance will grow manifold.
The purpose of this note though, is to focus on the leadership factor in implementing the GST. To begin with, considering the number of interested parties in the multilateral negotiation, to break through the Ruling - Opposition dynamics, to evolve consensus, to complete the enormous amount of legislative work involved, to get the Upper and Lower Houses to clear the Bills, and to finally get 29 states to pass the Bills in their respective Assemblies is nothing short of a miracle.
When it came to implementation, most magazines and their surveys predicted that small enterprises are ill-prepared, which would cast doubts on any administrator implementing it. The headline cover page stories of BW Businessworld for instance, had the following cover page quote, ‘SME’s reluctance to embrace indirect tax reforms is understandable, even large ones would have liked the rollout postponed, finds a survey’. Another essay said ‘India’s tryst with GST’ starts on a ‘Wing and a prayer’. Other magazines had similar covers.
Let’s consider industry representations. One IT representative said, “for an industry already reeling under change of business model, and further suffering headwind of increasing global protectionism, to further complicate it by multiple registration would only add to its woes.” The airline industry, including the state-owned Air India said most of India’s airline operators are dependent on globally spread computer reservation systems, we need time. For the financial services industry, the IBA represented that the preparedness of all banks is a question mark — how do you determine the location of the recipient of a service in a digital world where anywhere and everywhere banking is the norm?
From one point of view, all are valid concerns. But if you show too much empathy, you would stop in your tracks. A slight hesitation of the voice would have been enough for the system to pile on pressure. You postpone it once — who knows what new variables may creep in and derail it. Meanwhile, from the government’s point of view: “If there is chaos all around on launch, we’ll be publicly responsible for the mess. And worse, many would say I told you so. On the other hand, we think we’re prepared. But we can never be too sure.”
In the midst of all this, the firmness with which the administration went about the launch date is admirable. Union Revenue Secretary Hasmukh Adhia pointed out, “listen, the private sector is always more efficient than the government we expect them to catch up with us.” On the concerns of having to register separately in each state his comment was rather stock: “You do not have an option, it is the law, please follow the law, we will try and ease any hassles later.” Naveen Kumar, chairman of GST said, “for 80 lakh taxpayers the number of invoices to upload would be a maximum of 320 crore, we have prepared all the capacity.” I could almost hear the administration say, “It’s July 1, now get on with it”. That’s leadership mettle.
Management schools teach case studies about how Lou Gerstner, Meg Whitman or Howard Shultz turned around IBM, e-Bay or Starbucks. All great stories, but the technical, legislative and implementation challenges of a tax reform of this magnitude in a federal structure, in the midst of pushbacks, in a diverse nation of millions of enterprises, towers far above these case studies a thousand times over. In fact, GST is an extraordinary case study on transformation initiated by governments.
The implementation of the GST has greatly inspired us, convincing us that it is possible to achieve anything in this country if the government takes the role of a lead entrepreneur and pushes reforms.
