The Goods and Services Tax (GST) is all set to herald a new era in India’s taxation history. In its final stages of honing, it will be effective from 1st July 2017 across the country. While, some see it as a “Game Changer”, many are still spectators, adopting the wait and watch approach. But whatever said or done, it is the biggest ever tax reform being introduced in India post 1947. It brings under its purview various indirect taxes. Among others GST will subsume various central and state taxes including excise duty, customs, service, value added, central sales, entry, luxury and octroi tax. At present, these taxes computed together constitute around 25-40%, while the GST rate will be between 18 to 20%. Irrespective of the final drafts and real time implementations, GST can be termed as a Game Changer for Indian economy for the following changes seem inevitable.
1. Creation of Common Market: With the implementation of GST, India will have a common market for its 1.3 billion consumers. There will be uniform taxation and free flow of goods and services across the country. Stoking-in efficiency, this will be one immediate impact that the Indian market will witness once GST into comes play. Moreover, it will also increase the competitiveness of Indian products in the international market.
2. Easy Logistics: You will get your goods home delivered faster and at an economical price, thanks to GST, which eliminates entry and octroi tax. No more pleasing and bribing middlemen. A goods truck may be stopped for regular checking for security reasons, but long halts at toll booths with vehicle and goods documents will be history. So, the transit time and logistics cost will reduce.
3. Simplifying Tax System: The Indian tax system will become easy for the common man to understand. However, to begin with there is no one tax for all products. There will be four tax brackets, so your AC’s and refrigerators will be taxed at 28%, toothpaste at 18%, plane tickets at 5%, and staples will not be taxed. It will be easy for the common man to understand the tax system and do better home budgeting and savings.
4. Ease in Doing Business : With a simple tax system, doing business in India will be easy. A complex and draggy tax system keeps foreign investments and local businesses at bay. But with the implementation of GST, understanding the tax system will be easy, the system of bribing and middlemen will be eliminated. So, with GST, you can hope that red-tapism will soon be extinct. The World Bank report of 2014 also indicated that with the implementation of GST, India’s ranking as a lucrative business hotspot will rise. The move in this direction has also been positively taken by the US India business council. So, wait for more start-up’s and new MNC’s to come into play with the implementation of GST.
5. More Money with Government: A simple and easy tax system will facilitate compliance getting the central and state exchequer more funds in its kitty. So, cooperative federalism will soon be a reality. The pressure of compliance will increase and black economy will continue to shrink. GST will expand the tax net, getting more companies into the tax system.
Along with these positives, there are some challenges with GST as there are still a few sectors, which are untouched. The primary ones include alcohol and real estate. Moreover, training the tax staff with this new system will also be a challenge for the government. But any disruptions in business, commerce and other activities will soon phase-off. Embarking on a positive note, this will be one of the biggest changes initiated by the BJP led NDA government since it came to power in May’2014. More than 150 countries have undertaken such taxation reforms and have set examples, which gives a boost to India as well. Countries like Canada, Australia and those in European Union have also successfully undergone such tax changes in the past and it has proven for the betterment of their economy. It is expected to increase the Indian GDP rate from 0.9 to 1.7% facilitating the path of a prosperous nation.
Let’s all step-in together on a positive note, hoping the introduction of GST will pave the path for a well-to-do nation. If there are any issues, which you are facing at an individual or company level, feel free to reach our adroit team at http://www.gststar.com/.