Goods and Services Tax, and Gold (Part XV)
Below is a scene from anti-GST protests by traders in the Indian city of Surat. On 1st July 2017, India changed the way it imposes indirect taxes. As a result, there has been massive chaos around the country. Many businesses are closed for they don’t know what taxes apply to them, or how to do the paperwork. Factories are shut, and businesses are protesting.
A massive anti-GST protest in Surat [PT]
Increases in administrative costs have made economics of trading and manufacturing unfavorable for many. Most lack access to accounting and IT skills to implement the new system — India simply does not have that many skilled people. As many as half of all transportation trucks are not operating. The media have “decided” not to cover the demonstrations.
The new indirect tax is a value-added tax, but as can be expected from the Indian government, it is chaotic, bureaucratic, extremely complicated, and full of loopholes. If you pay GST to your supplier but if he fails to deposit it, you cannot claim it as an input tax, making a businessman not only a collector of tax but an enforcer — this kind of draconian VAT system likely does not exist anywhere else.
There are about 40 tax returns required each year for each province that a company operates in. While tax officers don’t know how the new system should work, failure to comply will lead to imprisonment.
A case of unforeseen complexities. Note: generally only four different levels of GST are advertised, but there are actually special rates for precious stones, gold and sugary drinks, so there are seven rates in total. [PT]
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