GST: President Pranab Mukherjee, PM Modi launch India's biggest tax reform

New Delhi: At the stroke of midnight, as the world slept, India woke up to one of the biggest tax reforms since Independence. The new GST tax regime is expected to transform India into one single market. “Today at midnight, we will decide India’s future course,” Prime Minister Narendra Modi said while launching the “historic” Goods and Services Tax (GST).

Amid vibrant flower decorations in Parliament’s Central Hall, the Modi government stepped out from the old to the new and signalled that this government stood committed to reforms and was determined to push through the most contentious and difficult of policies.

The new tax regime replaces 17 different Central and state taxes and 23 cesses, including service tax, value added tax, entry tax, excise duty among others. The GST is expected to remove the cascading effect of tax-on-tax and make it easier to do business in the country. After GST, goods will have uniform prices across the country.

As the country reels under agrarian crisis and farmers’ unrest spreads rapidly following a drop in crop prices, minutes before the GST launch programme began, the government slashed GST on fertilisers from 12 to five per cent.

The Central Hall of Parliament was packed to the brim with all the BJP ministers, legislators, former Prime Minister H.D. Deve Gowda and special invitees present to welcome and bask in the “bright new destiny.”  

President Pranab Mukherjee shared the dais with the Prime Minister, Speaker Sumitra Mahajan, Vice-President Hamid Ansari and finance minister Arun Jaitley for the launch of the GST. Also present were the country’s corporate honchos.

The President, reading out from a written speech, said, “The historical moment was culmination of a 14-year-long journey.”

For Mr Jaitley, the architect of the GST, the new tax regime was the beginning of “cooperative federalism.” It was Mr Jaitley who opened the special session saying GST would usher in an “India which will write a new destiny.”

While most Opposition parties, including the Congress, Trinamul Congress, Left parties, RJD, BSP, DMK boycotted the launch, the JD(U), Samajwadi Party, NCP broke ranks to attend the mega event. Mr Jaitley, while addressing the gathering, said that the “reforms show India will rise above narrow politics.”

Before the special session, the GST Council, led by Mr Jaitley, had met and decided to offer sops to farmers.

The Prime Minister attended the GST Council dinner. The GST council meet was attended by all state finance ministers except West Bengal’s.

If the government and the BJP were euphoric about the “one nation-one tax”, there were apprehensions that the GST, brought in after demonetisations, could impact economic growth in the short term.  

Experts say that while traders are still trying to come to terms with GST’s rules, the switching over to the new system of taxes could slowdown the manufacturing sector. There were also apprehensions on whether the GST network would be able to handle the quantum of transactions at initial stages.

Critics say that the GST being implemented by the Modi government is not an “ideal GST”. They point out that instead of one tax rate, the Modi government is implementing a four-tier tax.

Niti Aayog member Bibek Debroy hit out saying that any suggestion that the GST would boost GDP growth by 1-1.5 per cent was “utter rubbish”.

GDP growth in January-March 2017 fell sharply to 6.1 per cent, mainly on account of cash crunch caused by demonetisations.

Meanwhile, reports poured in of protests and agitations across the country. A train was stopped by traders in Uttar Pradesh and commercial establishments and wholesale commodity markets in some cities remained closed in protest against the “hasty” rollout of GST.

While a general strike by traders in Kashmir has been called on Saturday, Uttar Pradesh and Madhya Pradesh witnessed sporadic bandhs. Protests also erupted in West Bengal, Andhra Pradesh and Telangana.

While reaction across the country was mixed, the President inside the Central Hall said that launching of GST was a “moment of personal satisfaction” and recounted several meetings of the Council and how the new tax regime was a “triubute to the wisdom of democracy”.

After Mr Mukjerjee’s address, the Prime Minister and the President together pressed the button to usher in what Mr Modi called — “the Good and Simple Tax.”