INDIA @ 70 AND ECONOMIC FREEDOM

[Dr. Sanjiv Agarwal]

While there is a broad consensus that the global focus of economic growth is now tilting towards Asia, India is emerging as a developed nation backed by large and growing middle class and service sector. The Indian economy is on the cusp of performance and delivering growth at faster pace which is largely driven by economic reforms, infrastructure development, demographic dividends and consumption led demand. Given its socio economic profile, large scale investments backed by foreign investments has also helped. India is also one of the globally preferred destination of global investors. All this is now happening in India @70.

@ 70, we have come a long way.  India can be said to be no longer a fledgling economy which it was at independence in 1947. It is now the seventh  largest, and among the most attractive markets for investors. With the world's second-largest population, it holds much promise for global corporations, which is reflected in the rising number of companies investing in India. While it continues to gain economic might, its record of improving social indicators is underwhelming. India's economy is now over 40 times larger than it was in 1950-51 in real terms and Indians have over 10 times more income in real terms. A strong capital market infrastructure built in the last two decades has only helped in the economic transformation journey.

It is well known that India is a highly taxed economy and society. We have direct taxes and many indirect taxes and there taxes are levied by both- Union as well as State Governments, so much so that number of taxes, surcharges and cesses exceed 140 in number.

GST is considered to be the biggest ever tax reform in independent India with sixteen Central and State indirect taxes getting subsumed in one simple tax, i.e., GST. These taxes are as old as of 1944, i.e. senior to our independence itself in age. This could happen with complex marathon undertaken, first by the erstwhile Empowered Committee which dealt with VAT and later by GST Council, a constitutional body set up under the constitution to deal with GST related matters.

As India celebrates its 71st year of independence from British raj, the country also celebrates the independence from even older tax laws. Goods and Services Tax (GST) which turns just 45 days, has freed us from old tax laws including the one in existence even prior to country's independence, viz, Central Excise Act of 1944.

It is indeed remarkable that India could migrate to GST regime to allow country men get rid of sixteen odd indirect taxes which were levied by the centre and the states but the present form of GST is neither desirable nor practical- thanks to the political system we have. The form of GST could have been better. There being a hope for its improvement, it is hoped that legislatures will have wisdom enough to refine the GST law to be one of the best in the world- we may hope for it few years down the line but it requires a lot to be done by all the stakeholders.

One market, one tax should actually and eventually happen. This should also lead to one Authority and real cooperative federalism would be when taxpayers pay one single point tax and then centre and all states distribute the tax kitty amongst themselves. This form of freedom from taxes would bring real happiness, the ultimate goal of any freedom.

As professionals, we should have passion to learn and perform and be determined to deliver. That's the need of the hour. This calls for a visionary, selfless, forward looking leadership at the institute level (it lacks these attributes than the desired levels). That will happen only when we update ourselves with new economic & taxation laws and upgrade our skills. The future of profession and professionals is in value added services and knowledge based advise (human-ware). Compliances can be taken care of, and will actually be so, by the machines (software and hardware).

We are all independent professionals and command freedom to create a better tomorrow for self, others and country. GST is just one small segment of our lives. While GST will evolve, we will have to be a part of revolution- to adjust to the new system, to educate clients, to be able to perform and excel and to show the government the way to reiterate right Eco system for all of us.

We are fortunate to be a part of this migration and should be proud to be so. We had 70 years of freedom so far, now let's have another few decades of GST, but of course, an improved one over the present form. We should also have freedom from unwanted or avoidable compliances, freedom from poorly drafted laws, freedom from confusing interpretation, freedom from corruption, freedom from inefficient tax administrators and unskilled officers. Responsibility is something which ought to be on both sides. Hope that this would happen but the moot question is when and how fast it can. Tax administration will have to become responsible, accountable and ensure to use tax revenue in most judicious manner in national interest.  We need this economic freedom- to usher India into an era of glory, economic and social prosperity and to be a world super power in all spheres.

Economic reforms lead to tax reforms. On tax front, undoubtedly, India has scored much higher with implementation of GST. However, coming months are crucial when GST gets implemented. It will also be seen whether GST brings in the desired results – improvement in tax – GDP ratio, growth in GDP itself, revenue augmentation to States and industrial growth. Only time will tell.

Now that GST is in place, efforts ought to be on its smooth implementation, ironing out  the deficiencies in terms of provisions, few impractical rules and changing the mindset of tax administrators. The Government's job must also be to make it assessee friendly and facilitate compliances.