GDP or Gross Domestic Product has become a very commonly used metric for assessing the performance of an economy; in India in particular, the term GDP has come in for some amount of ignominy due to changes made in methodology of its computation, without generating equivalent and corresponding back-series numbers for comparison.
GST, or Goods and Services Tax, on the other hand, has come into fashionable existence in the last few years, although a few other more hilarious or comical versions of this acronym are also doing the rounds as electoral gimmicks. Somewhere, however, these twains are intertwined, because we had projected the GDP of the country to grow by an incremental 2 per cent, only on account of implementation of GST.
The third term GMP, is more interesting, although lesser known. It stands for “Good Manufacturing Practices”. More commonly applied to the pharmaceutical industry, GMP in a broader sense means hygiene, quality and competitiveness in manufacturing sector as a whole. GST is in turn very much relevant to GMP because introduction of one integrated country-wide tax was expected to bring down costs for our manufacturing sector, both logistics costs and input costs, enhance transparency and remove hidden transaction costs as well, and speed up in-bound and out-bound movements of goods. Evidently, all these impacts would increase the competitiveness of our manufacturing sector, help it grow faster, generate more jobs and in turn, contribute to growth of our GDP at a faster clip.
As we now celebrate the first anniversary of GST, it is certainly useful to take stock, even if some naysayers opine that GST is still very much a “work in progress”. Admittedly, there have been a few large hiccups around the IT infrastructure, complex registration and filing processes, problems in export related refunds, delayed implementation of e-way bills, etc. But with all that, even the most ardent critic will accept that aggregate revenues have grown, and some of the informal businesses have been forced to formalise themselves, and as a direct consequence, the indirect tax base has widened. These are significant longer term benefits for the nation. But if GST was to push up the growth of the manufacturing sector in India, this is yet not visible on the ground – on the other hand some contrary and disconcerting signals are emerging from some of the manufacturing sub-sectors. So, the conclusion we can draw is that GST is more good than bad, but for it to impact GMP and GDP positively, may take a far longer time horizon than we might have imagined.
In the mean time, the cement industry continues to lament the incidence of 28 per cent GST, and continues to argue for mitigation. And, with revenue growth being more than satisfactory, the industry’s prayers may get answered sooner than later.