In the recently concluded Rajya Sabha’s monsoon session, Kashmir issue may have settled nowhere, but India’s first major tax overhaul since the independence got a green light on August 3, 2016. After 16 years of its introduction in the Parliament and 6 years after the set target, Goods and Services Tax Bill (GST) will finally see the day of the light from April, 2017.
GST is a national level tax levied on manufacture, sale and consumption of goods and services. Simply, it means a single indirect tax rate applied all across the country. For instance, in tricity itself, we have witnessed petroleum prices differing in Mohali, Chandigarh and Panchkula. With the introduction of GST, this difference will be done away with and a single rate will be applied everywhere.
According to statistics, around 30% of potential FII’s are wary of investing in India, otherwise the investor’s sweetheart, because of the obscurity of its tax regimes. Basic reason behind such overhaul is loss of income by tax evasion. Not many are cleared with the concept of Input Tax Credit (ITC), that makes it difficult to compute actual tax payable and consumers in the end are charged more than they should. The difference is ‘personal gain’ and becomes fodder for Swiss Banks. It is predicted that rolling of GST will reduce tax rates and will increase the taxpayer’s base. Uniformity achieved through this change in the indirect taxation will lead to less complexity and eventually more investment for India.
GST would augment the resources at the hands of the government for development purposes. Fragments of indirect taxes like CST, VAT, Service tax and other numerous countervailing duties and their cascading effect will be eliminated. According to Chief Economic Advisor, Mr. Arvind Subramanian, dual GST will also improve tax governance in two ways: self-policing in case of Input Tax Credit; and dual monitoring structure of GST by both State and Centre. Due to tacit transparency, black money can be put a kibosh on. But according to few economists, GST can spell trouble for India as well. It will reduce the income and control in the hands of state governments, and since tax is the major source of income, this can lead to unequal bouts of development (or under-development) in different regions.
An ideal GST for India must be comprehensible, legally and economically, and not act as another sequel to Catch-22, like most of our laws. Anatomy of the reform must be simplified and should aim at tax rates that protects revenue, facilitate bureaucracy, encourages compliance, curbs tax evasion and black money, and avoids adding to already overriding inflationary trends. Government has proposed an approximate rate of 18%, and has done away with extra 1% added for the next five years for the loss incurred by state governments in the process of the same.
As a common person, one can go on and on about the assumptions that media and financial analysts blazon about the GST, but we are yet to see if the principle of ‘One India, One Market, One Rate’ will turn golden for the Indian Economy or fizzle out on the face of it.
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A social recluse. Soldier of fiction. Soliloquist. Either silent or sarcastic. Possesses no interesting version of ESP, but likes to think she has the same glasses as Harry Hart.