CAN GST EMERGE AS THE ONLY TAX COLLECTION
SYSTEM—AN ANALYSIS
(Food for thought)
Preface—It is encouraging
to read in the Newspapers that in the ensuing Budget (2022-23) the emphasis
will be on “CITIZEN-CENTRIC’ REFORMS.”
Many guess that in all probability the Income Tax would be replaced by
an Expenditure Tax. As a citizen. I beg
to make the following suggestion.
GST is one of the
finest legislations enacted jointly by the Central and State Governments. It is felt that it can become the ‘only
tax-collection system’.
As per the news appearing in the media, recently ’40
persons have been caught by the CGST officials to recover Rs.600 crore tax in
past four months’. The evasion must be much more as hardly, only10% of such
infringements are detected. To reduce such possibilities some suggestions are
being made hereunder.
Object & Aim – Tax-payers must be made answerable to only one Authority and not to several
Authorities, as is the case now. There should be one “single tax-collection
system” which is simple, people-friendly and easy to administer and comply
with. There should be only “One Nation & one Tax Legislation” Following is a submission for the consideration of
all the stake-holders.
Basic principles adopted
Individual is both a ‘contributor’ and a ‘consumer’.
As a contributor, he gives services to
the Society, by providing goods/services needed by it—which is his national
duty.
As a consumer, he gets services from
the Society goods/services needed by him.
For the running of the country, the service-receiver pay tax against the
benefits received. GST seems to be the best and ideal solution.
The proposal in detail:
At present, the consumer is subjected to tax,
based on the amount of services provided by him to the nation. The more you
produce, the more is your earning and the more you are required to pay tax
under the Income Tax. Providing service to the society is not an offence or
crime. It is urged that abolish the Income Tax.
As consumers we avail services from
the society. Let us pay tax against our
consumption by way of GST.
That is abolish Income Tax and retain GST as the
only instrument of revenue-generation.
The combined effect would be—
(a)
With the abrogation of Income Tax, everyone would
get enthused/enabled to give maximum output to the nation by production of
goods/services needed by the country—the GDP would go up,
(b)
The income in the hands of the producers/contributor,
would also increase,
(c)
One would like to put this increased earning first
into the Banks for reasons of safety as also to earn interest on the deposits.
(d)
The greater purchasing power in his hands would
result in higher demands for goods/services. This in turn would lead to higher
employment potential/opportunities--A dream of any Government.
(e)
Savings in the Banks would go up and hence
increased “Home Savings”—an indicator of the nation’s health.
(f)
The entire deposits would come into the banking. It would be available for productive purposes;
and also serve as the base of GST.
(g)
TDS is the easiest and
cost-effective method of collection of tax.
Hence, GST should be levied by means of TDS at the stage of withdrawal
of money from the Banks itself. That is
the levy would be bank-centric. Lesser
manpower would be required to administer the GST-cum-TDS regime.
Business-people fix prices of their products taking
into account the inputs and their profit margin—many a time it is very much on
the higher side because of their inherent greed.
Government may ensure, through its Revenue
Intelligence staff that the prices so fixed are reasonable both to the business
and the public.
Based on the reasonable prices so decided,
government levies GST on the products which becomes the selling price.
It is submitted that in order to make the GST
scheme simple and easy to administer, adopt a uniform flat rate of GST
tariff.
Reasons are many.
Some are: -
(a)
Government does not have an accurate mechanism/scale
to decide what rate should be applied on different items. Fixing tariff rates
on various goods/services by the GST Council would be a biased view with no
scientific basis. And would need frequent changes from time to time—that is the
case now
(b)
If at all, GST rate should be based on the degree
of satisfaction/benefit derived by the consumer. It would be difficult to judge
the importance/satisfaction of a particular item of consumption to the
individuals.
(c)
The wants would not remain constant. It would go on
changing from time to time. At a given
moment one may prefer to have only tea or even water over everything else. It would keep on changing from moment to
moment.
(d)
Let the citizens have the freedom to choose what they
want to consume at any given moment and pay a uniform GST.
(e)
It would be observed that even if a uniform GST
rate were to be applied because of the price-differential of the items based on
the quality, place of consumption and time of the year, the revenue-yield would
be different.
Place of consumption—Any item would be priced differently at a road-side Dhaba;
restaurants/hotels of different grades with AC or non-AC; in Kirana stores,
shopping malls, Airport, different cities, towns, rural areas.
Different seasons/festivals—For example prices of consumable items like milk, eatables/vegetables, Rug/रजाई, and Air Conditioner, etc., are priced differently
during the summer, rains or winter and on different occasions.
Without any further elaboration, we would like to
come to the tax-collection potential.
With the abolition of the Income Tax, almost all
the earnings would have come into the banking. Cash now circulation would come
down. Money stashed outside the country, would come back to the country. Aggregate
withdrawals of sums from the Banks would indicate the total consumption
of goods/services by its citizens.
To keep the compliance cost low, we should take
advantage of the modern technology available.
GST would be collected by means of TDS. That is, it would be bank-centric.
The approximate withdrawals of money from the Banks
(that is total consumption) are as under.
Total Aggregate
digital payments alone in crores
1,17,76,646
Source:43T_BULLETIN49335050F2C0484ABDEAFC19EE5408DB.PD
(rbi.org.in)
ADD another assumed Cash Transactions of
**
1,17,76,646
TOTAL rounded figure 2,35,00,000
**We have tried to
err on the safer side.
Our present tax revenue target for 2021- is Rs
19,76,424 crore (GROSS). A flat rate of
just 10% on 2,35,00,000 crores would give to the nation, a revenue-yield of
23,50,000 crore (NET)
It is urged that the experts may recommend
actual GST rates. They may keep in view the following—
While the GST rate would be uniform, it would
change from slab to slab. For example-
For withdrawals from the Banks is up to 5 lakhs …5% 5%
For amounts between 5 and 8 lakhs … 8%
For amounts between 8 and 10 lakhs ‘’’ 10%
1
AND so on and so forth
Major benefits that would accrue, if the above
Scheme is implemented:
Since there would be no Income Tax on the earnings-
(a)No one would feel it necessary to park his money
in tax-havens.
(b)Fortunately, already more and more people are
opting for digital transactions.
(c)To encourage digital transactions further,
government can think of coming out with a proposal wherein based on the
aggregate digital-transactions, the individual making the individual making the
payment as also the receiver would become entitled to a decent Pension and
Family Pension on attaining the prescribed age (may be 65 or 70) OR
contingencies like partial/total disablement.
(d)Individuals would withdraw bare minimum of cash
from the Banks. It may be examined whether a higher TDS can also be prescribed
against cash withdrawals. There would be a sharp decline in the printing of
currency and minting of coins.
(e)Abolition of Income Tax would result in increased
earnings as also in the spendings on ‘personal needs’ and hence higher GST
collection.
Lastly and more importantly, the GST due would be
realised at the stage of withdrawal of money itself from the Banks. The balance
in hand would be at the disposal of the consumer, which one would be
free to spend on any items of one’s choice on which there would not be any
further levy. It may lead to ‘one country : one price’.
For comparative study let us take one typical
situation.
Businessman/individual ‘A’ has an annual income
of Rs.40 lakhs and spends Rs.20 lakhs during that period. He has raised a loan of 5 crores for
the running of the business/personal affairs.
Under the existing system of Income Tax plus GST:
(a)He pays Income Tax on 40 lakhs and GST on 20
lakhs. He has to maintain and submit
a detailed account of his finances to the Income Tax & GST authorities.
(b) Would not pay any tax on Rs.5 crores as it is
now termed as LOAN—an unintended benefit.
Under the Scheme now being suggested:
(a)He would NOT pay any Income Tax on 40 lakhs; BUT
(b)Pay GST automatically on 20 lakhs PLUS 5
crores.
(c)Does not have to maintain any records and submit
tax returns.
(d)An enormous saving in Paper saving a very large
number of trees being axed for all time to come and its desirable effect on the
environment.
(b) He would pay a uniform GST automatically.
(c) He would have paid GST automatically on the
LOAN of Rs.5 crores too.
Other benefits are left to the imagination of the
readers.
Decide which would be a better option!
Lastly, since the proposed taxation is based
essentially on the BENEFITS derived by the individuals, the tax can
appropriately be called “BENEFIT TAX/ भलाई टैक्स”.
If implemented:
“PAYING TAX WOULD BECOME RELAXING” and
“सभी चैनसे सो सकेँगे l”
Secondly, to
administer/regulate special items like Narcotics, Drugs, Petroleum products
etc. a mini-tax on the pattern of the present Central Excise can be thought of.
Thus, the
nation would have one single tax legislation viz., GST, AND To cover
special items of goods like Narcotics, Drugs and super luxury items we can have
a mini-indirect taxation.
Additional
remarks:
GST revenue
is already being shared equally between the Central and the State Governments.
To extend the benefit to the Local Self Governments/Panchayats etc. a
formula can be devised in consultation with the Finance Commission.
The GST on business may be prescribed at a low
level say, 2 or 3%. It may look ridiculously low. It may please be appreciated that ultimately
this GST would be borne by the individual consumer, as business people would
include this element in their sale-price.
PART-2
Now comes an issue of greater importance, namely,
HEALTH SERVICE IN INDIA. Our country lacks woefully in Medical Services; this
is especially so in the rural areas.
With the increased revenue yield, it should be possible for the
government to come out with a simple but effective scheme wherein the citizens
can get free medical in any part of the country. To augment further the fund,
the industries can be asked to make contribution under the Corporate Social
Responsibility (CSR), and individuals and NGOs can be appealed to make
contribution by offering them Tax 100%break.
UNIVERSAL FREE MEDICAL SERVICES
(Health is the Basic Right of the citizens in a
Welfare State)
Our population is around 140 crores. We have
the advantage of the number. Hence an annual fund requirement can be
assumed to be Rs.500 per head. The total fund requirement would be around
700 crores per annum. To augment funds,
under the Corporate Responsibility all should contribute. Individuals may be
asked to contribute by giving them 100% rebate in tax.
Establish an organisation to be called “समाज सुरक्षा
संस्थान/Samaj Suraksha Scheme--(SSS)”. The In-Charge is to be known as “समाज सुरक्षा अधिकारी Samaj Suraksha Adhikari-- (SSA)”.
He would function under a Board of Governors. It
would consist of representatives of the Government and eminent persons.
SSA would recognise throughout the country –
a)
Hospitals; **
b)
Chemists for supply of medicines and medical aids;
c)
Authorised Medical Attendants (AMA)
**All private and government run hospitals except
Military Hospitals.
From time to time, tariffs would be prescribed for
their services. They would provide free services to the citizens AND would get
reimbursement once in a calendar month for the services rendered.
Citizens would be entitled get free treatment and
medicines from them in any part of the country.
The Aadhaar Card alone would be the sole ID
for getting treatment. They would be treated as paid patients.
If someone desires superclass wards or special
treatment, they would have to meet the entire cost from their pockets.
Watch Dog teams would be
there which can oversee the functioning of the services. They would have
wide powers.
To promote ‘Medical Tourism’ we can extend our
services to the foreign visitors. It will be in keeping with our tradition of अतिथि देवो भव.
NOTE: For rural
areas—special provisions may be considered so that those people need not come
to the towns/cities. In fact the
services there should be such that even town/city people would opt for
treatment in the rural areas.
As with any
Scheme, there is bound to be some misuse; it should not deter us.
Submitted to the Government of India, State
Governments and other stake holders, for favour of consideration.
Appeal to the Fellow citizens. Kindly go through the above for
comments, improvement, if any, in the presentation and recommend it to the
Governments for consideration. The final say of course would be of the
Governments. This would enable us to discharge our duty of paying our tax liability
without any hassle. All that we have to do is making maximum digital
transactions,
You may like to share this with your friends to get
their views and wide
support of the people. Thanks, and regards for
doing so.
The next General Election is due shortly in
2023-24. Because of this the present and
the other political parties would be more than willing to listen to the
public. Therefore, please act now so
that something good emerges soon.
“May God guide the Nation”
शुभम
कृष्णार्पणम
If not now, this can be thought of in the 2023 Budget.
Sviss38@gmail.com
