Some human emotions and reactions are excitement, frustration, ignorance, arguments! I never thought that GST, Goods and Services Tax, a drab subject will invoke so much of emotions. GST was implemented by Government of India effective from 1st July 2017. Before GST, the tax structure was extremely complicated and each state had its own tax rates and taxes. Doing business and managing tax compliance was an extremely complex thing with many different tax agencies, with many obstacles in doing business, it was almost like a hurdle race. I am not going to write about technicalities of implementation or real life details but about the human angle in GST implementation.
This change is supposed to be a game changer in the business ecosystem of India. GST was being planned since last ten years. But usual political lack of will, government change and horse trading delayed the implementation. First date declared for implementation was 1/10/2016 which was changed to 1/4/2017 then finally to 1/7/2017. Humans are of different types and the tendency in some is to crib about everything. On one side people said how can this government implement GST when they cannot even fix up the date of implementation! Though GST is being discussed for more than 10 years, when it really happened main refrain was “we were not given enough time”. How do you define enough time? Main preparation required for any business reform, other than infrastructure, is the change in mental setup. If you are mentally not ready, 20 years also will not be good enough time for getting ready!
All the big industry and many in trade have been under some tax regime all the time. Laws under excise regime were very strong but it was easier to play around in other tax types. Why do people avoid taxes? Is it with the noble cause of selling goods at a cheaper rate? No way! They do it basically to avoid showing the real volume of business they do, thereby saving on income tax. This is the so called parallel economy or cash economy. This is nothing new and it happens world over. When you have complex laws and equally complex systems, those who want to play around are happy because they can tweak the system and reach their ultimate goal, hide the real income. A friend Mahesh always used to say, “Pramod excise is the best thing that has happened to India.” Mahesh headed a manufacturing organization. He would say, “These laws mandated people to complete their work every day, only because of fear of going to jail!” Many people will be sloppy if allowed and would not complete their daily! It is fear that mandated people to complete the work.
GST compared to previous tax regime before 1/7/2017, is a very simple system. It is addressing many demands of business groups about cascading effect of taxes, causing heavy/double taxation on end products and services. Tax levels all over India for same product are same, so are tax levels on services. When the government decided to go ahead with GST, it was required to fix tax rates for each item based on available information, knowledge and discussions with trade and business groups. With such a large exercise there can never be 100% acceptance and there are bound to be changes over a period, and modifications made on the fly. The affected groups were bound to be unhappy and made a lot of noise! Authorities listened to most but some demands were unreasonable, so government ignored them. Human learns from birth that if you cry loudly mother will give you milk. These people are crying loudly to grab attention. The implementation phase saw cribbing at its best!
In some cases, there were errors and flaws which were not corrected even on approaching helplines, writing to right authorities and making genuine attempts. There were no resolutions coming, initially. This is a small group of businesses and these are the groups that are bound make maximum noise, in some cases justifiable. There were interpretation errors by consultants which resulted in chaos. But there are some groups who on one side say that GST is the best thing that has happened to India but and in the same breath say that it is a draconian system! The system has just started since last ¾ months. How draconian nature of system can be viewed or experienced by these people in such a short period? I doubt that other than non-resolution of their queries there is hardly any interaction with government agencies. Government is already publishing advertisements in newpapers showing FAQ’s for various group of businesses. I get a feeling that GST system will make life difficult for those who want to avoid taxes, but nobody can openly say so! So beat the drums and trumpets against the system!
People tend to tell false stories to complain against the changes. One person claimed that he was required to spend Rs. 80000/ for getting his organization registered for GST. There are no fees for registration. Governments drive for digitalization requires digital signature during registration. This person claimed that Rs. 30000/ was spent for digital signature process. It is false, consultants charge Rs.1500/ to get this done. Digital signature is valid for two years! So real expense was Rs.1500/. On asking about Rs.50000/ expense he claimed that he could not take Rs.50000/ tax credit because of the delay. This is again false because he could easily have taken it had he registered on time, maybe he did not know the right procedure or his consultant was not competent. Such false stories are floated because of lack of knowledge. Throwing tantrums due to lack of knowledge pretty easy.
Humans don’t want a change, if it is possible, as per Newton’s law of inertia. They will make statements like “Change is the only constant!” But in real life change management needs new systems, processes, retraining and change in thought process. This needs leadership to encourage people to change. Absence of these things will create situation where it is easy to blame everything on GST! Government or GST is a faceless entity so it is very easy to make such a drama if you get an audience. Some people have reached very high in life’s station, but this does not mean that they have total knowledge about GST. In cocktail parties they will make “knowledgeable” statements. When they meet a person with knowledge they tend to drift to join another group for discussion!
I feel that by Diwali next year, these strong emotions, discussions, reactions will taper off. People will then start singing praise of GST as if the whole world is reformed by GST, it is only a change in tax system! People will get used to GST, Newton’s law of inertia will set in and discussions during next Diwali maybe about North Korean nuclear bomb!