2016 has been an eventful year !! Other than the usual ‘breaking news’ and the political upheavals of the year, 2016 was surely different. First, it was of all things a game !! – the augmented reality game ‘Pokemon Go’ which received reams of newsprint and digital coverage and got almost the entire world into a frenzy – virtual reality translated into plenty of excitement, excellent game reviews, actual fights and even loss of lives . Some countries even passed a legislation to regulate its use ! Then ‘ Brexit’ – the shocking referendum which announced Britain’s decision to leave the European Union which put the European financial markets in a turmoil, cast uncertainty on the value of the GB Pound and put a question mark over the fate of scores of Indians who had taken British citizenship so that they could access the EU; Donald Trump’s unexpected win over Hillary Clinton; closer home – the surgical strikes against Pakistan, and of course the biggest earth shaker in India – the demonetization of 500 and 1000 rupee notes !!
While the President Incumbent of the most powerful democracy in the world, Donald Trump has threatened Mexico and warned of protectionist measures against Chinese imports to the U.S., China has been making friendly overtures to India. Goa was specially on the Chinese radar in 2016. With the first official Chinese delegation to the Chamber in Oct 2015, there were two visits by Chamber’s members to China in the months of April and August and a delegation of Chinese businessmen led by Chairman of Sino India Trade & Culture Promotion Council visited the Chamber in Oct 2016. Two major trade fairs showcasing Chinese products were held in Mumbai in December.
The GST Bill was another long drawn out battle of political power and maneuverings, Centre versus States issues, intimidations and negotiations. It was on the 4th of August 2016, that the Rajya Sabha approved the crucial 122nd Constitutional Amendment to turn the long pending GST Bill into a law – a truly major happening. GCCI as you know has supported GST. However there are certain issues which have to be addressed. GCCI submitted a memorandum to Shri Sharad Yadav, Hon’ble Member of Rajya Sabha & Chairman of Parliamentary Standing Committee on Industry. We are concerned with the multiplicity of returns. From eight returns under the VAT regime, the number of returns under GST will go up to thirty-eight. Add to that the multiplicity of returns. Since GST is a destination based tax, the companies will have to obtain registration in each and every state where it has sales. MSME manufacturers presently exempt from paying excise duty (if annual taxable turnover is upto Rs.1.5 cr) would be liable to pay full rate of GST. This may bring their products up for stiff competition with those of industry leaders in terms of tax costs involved.
Small scale service sector is also likely to face an increase in tax rate under GST as against the present effective rate of 15 percent. GST is likely to subsume some major Central and State levies such as duties of excise, additional duties of customs (applied in lieu of excise and local taxes), service tax, value added tax, central sales tax, entry tax, octroi and luxury tax. These taxes in aggregate constitute typically 25 percent to 40 percent of the price of products with certain categories being taxed at lower rates. There could be a reduction of tax incidence for several product categories if the standard GST rate is notified in the range of 18 percent to 24 percent.
The Parliamentary Standing Committee was therefore requested by GCCI that States should have exclusive control over all dealers (traders, manufacturers and service providers ) up to a revenue threshold of Rs 1.5 crore in a year.
With GST set to be implemented in July 2017, the proof will lie in the implementation. Also yet to be fully understood are the effects of demonetization. Add to this the upcoming state elections in February . There are a lot of things which have happened in 2016, the effects of which will be visible only much later. The spark is lit – will it light up the economy ? Only time will tell !
(President – GCCI)