GST AS THE ONLY TAX COLLECTION SYSTEM

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