Govt. must not lose time revealing its plans with special GST

Thursday, 31 December 2020 00:00 - - {{hitsCtrl.values.hits}}

By Nadeeshan Fernando

The longer the Government takes to announce mechanisms for its single Special Goods and Service Tax (GST), the higher the losses it will incur.

During its Budget presentation the Government proposed a GST to replace multiple bands of taxes on the alcohol, tobacco, vehicles, telecommunications and gaming sectors. The State Minister of Money stated its value and workings will be spelt out before the dawn of the new year. However, with 2021 just a day away, this seems far from becoming reality.

The delay poses more challenges to Government at a time it is desperate for better revenues. Some traders have already begun holding stock to profiteer from anticipated prices increases – creating artificial shortages in the market. In addition, the introduction of a new tax mandates the advent of new processes for collection from the multiple sectors and its players.

Every effort must be taken to minimise delays to develop and deploy these processes. If the government is forced to impose a retrospective tax due to delays, this would pose further challenges to industry and dampen business confidence.

The problem does not arise so much for motor vehicle imports as the Government stated it will not consider new imports for a period of at least two years. The gaming sector too conceivably is presented will lesser challenges.

However, problems have already arisen with the tobacco and alcohol sectors as some traders and distributors are already hoarding stock to benefit from a possible price increase. Artificial shortages are driving consumers towards illicit products, and sustained exposure to these underground markets present numerous socio-economic challenges the country could do well without.

A primary objective of the new single tax is to gain better control over illegal trade, and every action must be taken to prevent further erosion of the legitimate market. If the GST were to come late with a retrospective spin; the biggest challenge would probably be on the telecommunications sector, as service providers have already billed customers under the prevailing system.

A simplified system of tax is most welcome for these identified sectors and even more. However, to delay its mechanism and implementation will only defeat the good intentions of the Government. This also hampers business and industry from formulating its forward plans, especially at a time the private sector is looked upon as the engine of growth.

Despite some criticisms, the Government has presented a largely industry-friendly Budget as endorsed by the private sector. It must not let the momentum slip by taking too long with its machinery.