“Goods and Services Tax” bill would be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the central and state governments. Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. GST will turn India into one common market, leading to a greater ease of doing business and big savings in logistics costs from companies across all sectors. GST is aimed at creating a common national market in the country by eliminating a plethora of taxes imposed by the centre and state on movement of goods and services in the country.
The deadline for the implementation is April 1 2017.The biggest question faced by the government is the rate at which it should be fixed. GST would be applicable to most goods at 18% but can be higher for a few goods. If charged at a higher rate the retailers will start hiding their sales of taxable products while increasing their sales of non or less taxable products.
The committee of GST had also recommended a 2-6 per cent rate for precious metals, a low rate of 12 per cent for mass consumption goods and a high demerit rate of 40 per cent on luxury goods and tobacco. While the government promises that GST will improve the current taxation system which is highly complex and highly leaky, it might result in other repercussions. Since the tax on luxury items and goods are high, it might lead to illegal selling of these goods and hiding the sales of such goods from the government.
India being an import driven economy, GST would help in increasing the trade. The trade will increase as the taxation system would become uniform and tax will not be charged at every step. This would result in the increase in logistics of the country thus simplifying the imports and increasing trade. Also many countries would increase their interest in the Indian economy for trade due to simplified and less rate of tax system.
In the era of Make in India the simplified tax structure would also encourage the manufacturers to manufacture goods in the country. It would help in reducing the dependence on imports. The demand for Indian manufactured goods would increase in the market. The simplified tax would result in increase of exports. This would lead to an increase in the Gross Domestic Product of India and reducing the Fiscal deficit.
GST is more of a “BOON THAN BANE” for the Indian economy. It supports the new era of India which furthers Make in India, demands Ease of Doing Business and encourages Start up India. GST can also be called as the financial statement of the Indian economy. The finance of the Indian economy will be a reflection of GST. GST is the first step towards “ache din” my Narendra Modi and promises that the ache din would last forever.
Global business operations,
Shri Ram college of commerce