A Perspective on Good and Service Tax (GST)
The huge ancillary tax structure implemented in more than 150 countries called the Goods and Service Tax provision heightens the country’s economic growth. Though it was introduced in the year 2000 during Mr. AB Vajpayee’s ruling, Lok Sabha only passed the constitutional amendment on 6th May 2015. Many were at dismay after the implementation of GST.
This all-inclusive tax levied on manufacturing, sale and utilization of goods and services brings about standardization to the already existing system. Merging of both Central taxes – excise duty and service tax and State tax – VAT, as one, boosts India’s position in domestic and international markets. This will thus reduce the total tax load by 25-30% and allows active cross consumption of funds.
Benefits of Saying YES to GST
The then Finance Minister, Mr Arun Jaitley had said, “GST is one of the most significant TAX reforms in the history of India”. Professionals have concluded an extensive study on GST to enlist the following advantages:
- A new tax regime making a unified tax rule gets introduced.
- It incorporates both the central and state taxes.
- Transparency and a better spread to the unified tax rule.
- The surging effects of taxes on manufacturing sectors become relaxed, thus improving its race on cost for goods and services.
- Over-all cost is cut on goods and services, thus increasing its consumption.
- The biggest benefit is enriching the luxury of doing business in India.
Though it might not be required from the law, GST Registration can be done by anyone voluntarily. On the other hand, businesses having a turnaround of more than 20 Lakhs, GST registration becomes mandatory.
Why the Big Hue and Cry on GST Implementation?
A positive picture has been painted with regards to GST implementation, but firm like Goldman Sachs does not agree. They have evaluated and concluded that growth rate on GST taxes would be a stunt, thus raising consumer price and in turn decreasing the tax collection. They also believe that certain ambiguities in the proposed tax regime may be the reason why anticipated outflow may not be delivered.
The structure of GST is honestly complicated, and it might create economic and political arguments. It is no joke to coordinate with 29 states and 7 union territories to apply such a tax regime. Every state might lose their say in determining rates hence. The GST rates proposed seem much higher than the highest service tax rate of 14% paid.
The likelihood of seeing GST succeed is only if India decides to invest in strong IT networks for which Internet connectivity should improve. This, in a way also affects individuals and businesses to perform their GST Registration as returns and payments must be made online. With E-Commerce booming from all fronts, the Internet plays an important role. No proper connectivity makes it next to impossible to track any online business transaction. Another issue faced is clarity in product demarcation. New methodologies are being developed to cross all these mentioned hurdles, but until then the generation of tax would be uncertain.
Points to Ponder About the Future of GST
There is no doubt that the present GST establishment will help streamline the indirect tax system and also remove disorganization created by the earlier assorted taxation system. But if the government can analyse how more than 150 countries have succeeded in implementing GST, and the same is shared with the citizens, it may soothe and settle their nerves.