Shabir Bhat
The much awaited economic reforms in India, for a simplified and uniform tax rate,were passed in the Parliament of India on 03 Aug 2016. This economic reform is intended to transform India into a single market place. Its the biggest tax reform in independent India, and infact the biggest economic reform since the structural reforms in 1991, has been now passed in both the houses of parliament after a decade of political logjam, debates and discussions. The PM of India stated that, the consensus over GST is proving that Rashtraneeti is above Rajneeti. In a major breakthrough on Monday, the GST council on both sides reached at a consensus on contentious issues such as sharing powers for control over tax payers under GST but the new indirect tax regime will now be rolled out from July 1 2017, instead of previously planned April 1. The consensus was reached after the centre agreed to the demand of states to go in for horizontal split with regard to tax payer on annual turnover. The GST is expected to be the legislative measure that will help transform the economy ushering in transparency and and most of all, bringing the concept of ‘one country one tax’ into implementation. Goods and services tax(GST), which subsumes 15 central and state taxes on goods and services will create one single indirect tax rate across states and make India a truely unified market. Its expected to ease a cumbersome tax system, help goods move seamlessly across state borders, curb tax evasion, stimulate investment and make investing and doing business in India easier. The existing system of Central value added tax and state VAT suffers from cascading effect. As the two are not interlinked, the system leads to high tax on consumers. There are taxes at different rates and multiple points. The centre has taxes like Income Tax, Service Tax, Excise Duty and Security Transaction Tax while at state level it includes VAT or sales Tax, Octroi, State Excise, Property Tax, Entry Tax, Agricultue Tax. These taxes lead to increased tax burden on Indian products effecting the prices and sales in domestic and international markets. One of the most difficult challenges for investors and industry in India is its complicated system with multiple rates at both centre and states. Its clearly discernible that this fractured mandate of central and state leaves a lot of gaps in the supply chain. Therefore, a compressive GST is necessary to align rules for taking and utilising credits for CGST and SGST. The Centre Govt will levy and collect GST and the state will levy and collect SGST. The centre will also levy and collect Integrated GST( IGST) for interstate supply goods and services. GST will have a far reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services, supply chain optimization, accounting and tax compliance systems. That is the reason why GST BILL has been described as a reform measure of unparalleled importance in independent India. Its to be levied on most goods and services barring items such as petroleum, tobacco, alcohol etc.
With GST, it is anticipated that the tax base will be comprehensive as virtually all goods and services will be taxable at minimum exemptions. GST will be the game changing reform for Indian economy by creating a common Indian market and mitigating the cascading effect of tax on cost of goods and services. The GST will decisively take the Indian economy to the next level for the better. Bundling of plethora of indirect taxes of centre and state into a single tax code will bring down the cost and price especially in the manufacturing sector.
GST is, thus, a giant leap for the country in tax reforms to inspire confidence of manufacturers and investors to push the economy forward. GST is expected to boost revenue collections by plugging leakages and evasions and will have potential to boost the country’s GDP by as much as 2%.The real success of GST lies on the impact on the common Indian consumer. We hope that Implementation of GST proves to be a game changer in a positive way and proves to be beneficial not only to common man, but to the country as a whole. We hope GST leaves a positive impact and helps in poverty eradication by generating more employment and more financial resources.
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