The Clean-up Season

On August 3, a Wednesday, the Rajya Sabha finally passed the Goods & Services Tax Constitutional Amendment Bill, clearing the path to implement the most ambitious tax reform in the country. GST has been talked about since 2006, and was introduced as a bill in the Lok Sabha in 2011, but it was stalled by the opposition parties. Even after the Modi government came to power in 2014, it has taken over two years of negotiations for the GST Constitutional Bill to clear both Houses of Parliament.

If it works exactly as it is envisaged, it will bring in enormous tax transparency, cut out the plethora of tax rates, bring down tax disputes dramatically and, in the long run, make a host of goods cheaper because the overall tax burden is expected to come down. In theory, it will also cut off tax arbitrage, and turn the country into a common market with every product and every service taxed uniformly whether you are in Kashmir or in Kerala. The Union government hopes that it can be implemented by April 1, 2017.

Meeting that target will be a tall order because of the number of steps involved before GST can be implemented across the country. The Bill will also have to be ratified by at least 50 per cent of state assemblies, which the government hopes will happen before the end of the month. After that, the President needs to give his assent, and then different states need to present their own bills to the respective assemblies, the IT backbone needs to be developed in both the Centre and the states, and a number of other details tied up, including training of officers on the new tax system, before it is rolled out. Even the tax rates for different goods and services will need to be worked out in detail, though some work has already gone into it. All the states will also have to work out their own GSTs, within the ambit of the overall GST. Ideally, all states should adopt uniform GST rates for similar goods, but that is by no means certain. And if the rates are not uniform, some degree of tax arbitration will happen. Still, in the long run, it is a far better system than what we follow currently. It represents a massive clean-up and restructuring of the tax system to make it more efficient and broad-based. In our GST package, we give you the basics of how GST works and what is needed to be done now. We will continue giving you updates as and when the Centre and the states take the next steps.

Talking of clean-up and efficiency, Railway Minister Suresh Prabhu has taken on the task of doing that at the Indian Railways. It is a gargantuan task, given how big the organisation is and how inefficient it is currently. Prabhu is one of the most efficient ministers in the government and he has made commendable progress. But even by his estimates, the task may take well over 10 years. So far, much of the changes he has initiated have not really started making too much difference to the overall project execution and finances of Indian Railways.

In our cover story this issue, Associate Editor Anilesh S. Mahajan takes a look at the tasks before Prabhu and what he has managed so far.