Goods and Services Tax (GST), the evolutionary reform in Indian indirect taxation since independence will change the face of Indian businesses. This much needed reform will finally see the light of the day from 1st July, 2017. Some call it “Game Changer”, “Revolutionary” as it simplifies the complex structure of indirect taxation in India making it easy for people to do their business. It is also being called the fuel of Indian economy as it will help to bring more cash flow in the form of taxes facilitating the growth of Indian economy. GST replaces around 17 central and state taxes with one, uniform tax. This eliminates the challenges and inefficiencies that the multiple taxes create and also has a ripple effect on taxation.
Bringing the Indian indirect tax regime at par with many developed nations, GST will significantly impact business in India. It will be easy for you to start your business and you will also enjoy tax exemption until your company has a specific amount of turn over. So, good news for startups as businesses with annual turnover of over 10 lakhs will have to register for GST, unlike the 5 lakhs cut off under VAT, which was previously required. Further, if your business has annual turnover between 10-50 lakhs you will benefit with lower tax rate. So, GST also replaces VAT, which was one of the biggest nightmares for startups. Improving the global competitiveness of India, this uniform tax system aligns with the Make in India program too. Biding goodbye to Octroi and other taxes, which vehicles had to pay while crossing from one state to other, transportation of goods will be much cheaper making Indian goods more competitive in the global market.
Moreover, a stable, uniform and transparent tax regime, will be lucrative for foreign investments. According to a report by the National Council of Applied Economic Research, we can expect growth of job opportunities and rise in GDP by 1-2%. Adding to the stable quotient of Indian economy will be the reducing rate of inflation post the implementation of GST. The International Monetary Fund also projects a medium term growth above 8% after GST comes into effect in India.
By reducing tax restrictions, GST will facilitate and is already facilitating innovation in business. Many Indian businesses have started the process of restructuring like shift to manufacturing from import, reduction in depots, adding new products to their list. With GST coming into effect, it is your business that will be given priority over multiple, inefficient and road blocking taxes. And with the GST rate announced by government, it is appearing to be profitable for cement, consumer durables, FMCG, pharmaceuticals, automobile, metals, multiplex and many other sectors.
Accepted by over 140 countries across the globe, GST has benefited economies like France, Canada, UK in getting the tax dues. The chances of tax evasion reduce significantly with GST. Vendors and suppliers will be insisted to furnish invoices by big and small companies making it difficult for people to evade tax. In most developed countries the direct to indirect taxation ratio is 35:65 as against India where it is 65:35.
So, overall the implementation of GST is a win-win formula for Indian businesses as it ensures seamless movements of goods, removes entrepreneurship and investment barriers, reduction in tax burden, inventory and logistics cost. Furthermore, this uniform taxation will reduce price gaps and bring growth opportunities for the organized and unorganized sector.
The road to GST will be beneficial in the long term for Indian businesses and economy. An evolutionary reform, there will be challenges and issues in the beginning but they will soon iron out and GST will be perfected. And it will add a new dimension to the growth and development of Indian economy bringing it way up on the radar of global economies.