Impact Of Gst on Common Man: Is It Really ‘One Nation, One Tax’?

Introduction

The Introduction of the Goods and Services Tax (GST) in India on 1st July 2017 was hailed as a revolutionary step in the country’s indirect taxation regime. Touted as “One Nation, One Tax,” GST aimed to unify India’s complex web of indirect taxes and create a seamless national market. For the average citizen, the expectation was simple: transparent pricing, reduced tax burdens, and simplified compliance. But as we cross several years since its rollout, it’s time to ask—has GST really benefited the common man, and does it truly live up to its slogan?

Understanding GST: The Basics

GST is a destination-based tax levied on the supply of goods and services. It replaced various indirect taxes like Value Added Tax (VAT), Central Excise Duty, Service Tax, Octroi, etc., bringing them under one umbrella. It is categorized into:

• CGST (Central GST): Collected by the Centre on intra-state sales.
• SGST (State GST): Collected by the State on intra-state sales.
• IGST (Integrated GST): Collected by the Centre on inter-state sales.

The GST Council, comprising representatives from the Centre and States, determines tax rates, exemptions, and policies. The standard GST rate structure includes 0%, 5%, 12%, 18%, and 28% slabs, depending on the nature of goods or services.

GST and the Common Man: Expectations vs. Reality

1. Price Reduction: A Mixed Bag

Expectation: GST was expected to bring down the prices of goods and services by eliminating the cascading effect of taxes.

Reality: While GST did reduce prices of some essential goods like household items (e.g., soaps, detergents, toothpaste), the prices of services (like insurance, mobile bills, travel) rose due to a uniform 18% tax rate.

For example:

• Eating out became more expensive initially, as restaurants were placed under 18% or even 28% slabs.
• Services like banking and telecom, earlier taxed at 15%, were hiked to 18%.

Thus, for lower-income groups, the benefit has been marginal, especially as daily services became costlier.

2. Simplification of Taxes: Yet Not Simple Enough

Expectation: GST would replace multiple taxes with a single one, simplifying the tax system.

Reality: While GST has consolidated various taxes, the presence of multiple slabs and frequent rate changes have led to confusion. The complexity of filing multiple returns (GSTR-1, GSTR-3B, etc.) and maintaining digital compliance has burdened small traders and shopkeepers, many of whom operate without professional help.

Moreover, many common people who run small businesses or home-based services find it hard to adapt to the technical and procedural formalities of GST.

3. Impact on Daily Essentials

The GST Council was careful to exempt or lower taxes on essential commodities:

• 0% GST: Fresh vegetables, fruits, milk, curd, etc.
• 5% GST: Edible oil, spices, tea, sugar.

However, processed foods, branded dairy products, and packaged items attract higher rates (12% or 18%), which affects the urban poor and lower middle class. So, while the rural and agricultural sector is relatively protected, urban households face higher grocery bills.

4. Boost to Formal Economy – But a Challenge for Informal Sector

One of the biggest structural changes of GST is its push towards formalization. As businesses need to register under GST to avail Input Tax Credit (ITC), many previously unregistered small traders are now part of the tax net.

While this boosts the long-term transparency and tax base, it has posed short-term challenges:

• Small vendors and artisans have struggled with compliance costs.
• Many small manufacturers and service providers have opted out of formal business due to operational challenges.
• For the common man dependent on these sectors (tailors, electricians, grocers), service access has either reduced or become costlier.

Is It Truly ‘One Nation, One Tax’?

The spirit of GST was to ensure uniform tax rates across the country. However, several factors indicate that the system still falls short of this goal:

1. Multiple Tax Rates

The existence of five different tax slabs means that there isn’t truly “one tax.” A single product might attract different rates based on packaging, branding, or usage.

For example:

• Loose rice (0% GST) vs. branded packaged rice (5% GST).
• Air-conditioned restaurants (18%) vs. non-AC (5%).

This tiered system creates inequality and confusion among consumers and businesses alike.

2. Petrol, Diesel, Alcohol Out of GST

Key revenue-generating commodities like petroleum products and alcohol are outside the purview of GST. Hence, their prices vary across states due to VAT and other local taxes. This exclusion directly affects the common man, as fuel prices influence transportation, food delivery, and inflation. The lack of inclusion of such essential items contradicts the vision of One Nation, One Tax.

3. State-Level Differences

While GST is centrally governed, States retain the power to levy certain cesses and duties. Additionally, compliance and enforcement mechanisms vary, which can lead to uneven application of rules. Moreover, state compensation issues and political disagreements in the GST Council sometimes slow decision-making, affecting rate rationalization and clarity.

Positive Changes and Government Initiatives

Despite challenges, the government has introduced several measures to ease the burden:

• GSTN portal has been improved for user-friendliness.
• Quarterly return filing and composition schemes for small taxpayers.
• Rate rationalization to bring more items under the 5% and 12% slabs.
• Also, e-invoicing and digitalization have improved tracking, reduced tax evasion, and increased transparency—benefiting the economy in the long run.

Conclusion: Progress, But Not Perfection

While GST has streamlined India’s tax structure, calling it truly ‘One Nation, One Tax’ would be premature. For the common man, the experience has been a mix of benefits and burdens. Prices have stabilized for some goods but increased for services. Tax compliance remains daunting for small businesses. The exclusion of fuel and alcohol limits the unification promise.

However, GST is a work in progress. Continuous efforts by the government and the GST Council to simplify procedures, rationalize rates, and include more products under the tax net could eventually fulfill its original vision.

The road to “One Nation, One Tax” is not without bumps, but with course corrections, India might eventually achieve a truly unified tax regime that benefits every citizen equally.

References:

GST Council Official Website – https://gstcouncil.gov.in

Press Information Bureau, Government of India – pib.gov.in

Economic Survey of India (2022-23)

Ministry of Finance, India – GST Updates

PRS Legislative Research – https://prsindia.org

The Hindu BusinessLine, July 2022 – “GST: Is the promise of One Nation, One Tax fulfilled?”

Economic Times (ET) Articles on GST Rate Revisions.