This open letter to prime minister Narmada Modi from Congressman Tehran Poonawala points out the inherent confusions in the GST
Dear Shree Narendra Modi ji,
I write to you in anguish, to apprise you of the reality of exactly how you have messed up with regards to the Goods and Services Tax (GST) that you tout as your greatest reform.
Sir, GST was supposed to be one tax rate in one nation, but for eg in a restaurant that has both an AC and a non AC section you have two tax rates. (18% and 12% respectively). So can you imagine a restaurant that has an AC and non AC section restaurant there will be different tax rates. Adding to this confusion is a tax rate of 5% for those restaurants who have a turnover of less than 50 lacs. What if a neighbourhood restaurant decides to cheat on taxes to enjoy a price advantage over the honest tax payer? Add to this, the fact, if one were to have restaurants across the country, you are faced with different tax rates on account of liquor! Why keep liquor owners like Vijay Mallya out of GST?
In the gym business by exempting yoga, if a competitor decides to sell membership under "yoga" receipts and not charge GST how do you expect an honest gym owner to compete?
Even if a gym owner wants to be absolutely honest, he will be killed by his competitor who will include "working out" as a package with the yoga membership thus enjoying a huge price advantage. Also local run gyms will destroy gym chains on account of discounts due to tax evasion as chains will not tinker with the receipts.
In the hotel categories, some hotels have long term corporate tie ups, for eg if a star hotel whose room rate is Rs15, 000/- were to offer rooms at Rs 7499/- on account of a long duration stay, the tax rate would be 18% as opposed to 28% for above Rs 7500/- This will leave hotels at the mercy of the local income tax officers. Also incase of a star category hotel run by an individual the concerned owner will reduce his room rates to 7499/- to avail of a lower tax and beat a branded star hotel, who on account of their brand standing, cannot reduce their rates. Or the owner will bill the room rate at 7499/- and avail of the lower tax rate and bill the balance room rate amount under another category so as to beat competition. How is this fair to those who want to be honest? Again with different Liquor rates in different states, plus cess, hotel chains are going to go through a nightmare. May I dare say the already stressed hospitality industry is poised for very bad days ahead.
Sir, this is not Dr Manmohan Singhs vision of GST that you as CM Gujarat blocked for a decade. These are not tax reforms. Your version of the GST will give rise to police raj, black money & inflation. It will also hurt our service industry. For eg we will miss out on tourism to China, Sri Lanka, Thailand and even Dubai. It will also diminish the great growth that our service sectors were witnessing thus reducing jobs & hurting our GDP.
Sir , I do not know if as a child you read the story the Emperor's New Clothes but someone needs to tell you sir, that this is not GST as much as you proclaim it is. Infact sir this GST must be renamed the Great Stupid Tax!
I understand most news channels will go on about how great your GST is and no entruprenuer will speak the truth cause most fear you. But sir may I dare say, like demonetisation this version of the Great Stupid Tax will further hurt our economy specially the service sector. The GSTN network is still not equipped to handle 3 to 4 crore b2b invoices every month and I do see it collapsing initially.
Indians had placed their hopes in you to bring reforms. Sir, you are economically taking India down the path of Venezuela. I know many will scoff at what I say today but your government is doing harm to the foundation of our economy. I request you to still work on reforming the Evils in what I call the Great Stupid Tax.