We all have been wondering what is GST ever since its inception, haven’t we? People in the nation have been quite curious as to how GST, undoubtedly the most important Indirect Tax Amendment since independence, shall roll out. The wait is now about to get over as we proceed towards its implementation most likely with effect from 01.07.2017.
GST is one comprehensive indirect tax for the whole nation, which shall make India one unified common market to manufacturers and consumers throughout the country. The Constitution Amendment Bill for Goods and Services Tax (GST) was approved by The President of India post its approval by both the houses of the Parliament (Rajya Sabha on 3 August 2016 and Lok Sabha on 8 August 2016) and was ratified by more than 50 percent of state legislatures.
The main purpose to bring GST is to make the tax base comprehensive. Therefore, the ideal proposition shall be to bring all goods and services within the ambit of GST and allowing facility of seamless Input Tax Credit.
GST shall prove to be a game-changing transfigure for the Indian economy by composing a unified Indian market and reducing the gushing effect of the tax on the cost of goods and services. It will bring a huge percussion at the tax structure, tax incidence, tax computation, tax payment, compliance, credit utilization and reporting, leading to a complete overhaul of the prevailing indirect tax system.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, IT, accounting and tax compliance systems.
Some of the advantages to be offered by GST are briefly explained below:
- Major Indirect taxes to be subsumed in one tax (GST): GST shall subsume major indirect taxes making life very easy for the consumer. Consequently, the cost of complying with various Indirect Taxes that shall be subsumed in GST shall also be saved.
- Greater competitiveness in the market: The burden of taxes shall shift from manufacturers to consumers and hence, manufacturers will be free to explore more, with more freedom. Therefore, there shall be more competitiveness in the market. There shall also be a reduction in transaction costs of doing business, which would, in the long run, lead to an enhanced recreation for the trade and industry.
- Uniform tax rates: GST Regime will ensure that indirect tax rates and structures are common across the country. The VAT rates that were cut down by some of the states to attract more people to buy their product can no longer do so. All states shall be at equal parlance now.
- No confusion: All confusion regarding what is a manufacturing or what is a service activity will be eliminated. All economic activities will be “economic activities” only and will be taxed. There will be no taxes on taxes. There will only be one Indirect tax that is GST.
- Freeing up: State restrictions and levies often do not allow free trade and have complicated e-commerce routines. Some sellers are not able to ship goods to some particular state due to some restrictions of forms/compliance etc on goods above certain amounts. All this will end in GST Regime.
However, with pros come cons too. Here is what the lawmakers still need to consider:
- Increased monopoly of centre: The autonomy of state shall be compromised as the role of the Centre increases. Centre shall fix the percentage of revenue to be shared. Some of the states might even suffer from a loss on the account of tax sharing.
- The burden on taxpayers: GST is definitely about reducing the cost of manufacturer thereby it shall put the burden on the consumer as the tax credit of GST shall be recovered ultimately from customers.
While all the pros and cons are just the assumptions and anticipations of the statements of the government, we are still looking forward to the final GST Rules and hoping that GST shall provide with corrective measures for the loopholes which we are carrying from last many decades.