What is GST? When is GST launch or rollout in India? These are the most sought after questions today across the country as India prepares for midnight tryst with One Nation, One Tax.
What is GST? When is GST launch or rollout in India? These are the most sought after questions today across the country as India prepares for midnight tryst with ‘One Nation, One Tax’. Here we try to answer these questions for you. Goods and Services Tax (GST) is one indirect tax for the whole country, making India a single unified common market. In simple words, it is a single tax on the supply of goods and services, right from the manufacturer to the consumer. It can also be said to be a destination-based tax. As per the GST Act, credits of input taxes paid at each stage is available in the subsequent stage of value addition, making GST essentially a tax only on value addition at each stage. The final consumer thus bears only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
As per the GST Act, credits of input taxes paid at each stage is available in the subsequent stage of value addition, making GST essentially a tax only on value addition at each stage. The final consumer thus bears only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. The GST will be launched today by President Pranab Mukherjee in the presence of Prime Minister Narendra Modi in the presence of hundreds of leaders during a special joint midnight session of the Parliament. As such, the GST would come into effect after the midnight today, that is from July 1, 2017.
GST is considered to be one of the most significant tax reforms introduced in the history of Independent India’s fiscal evolution since 1947. The GST does away with the multi-layered tax regime that existed in the country until June 30, 2017. The GST, thus, would have a singular impact on the economic growth of the country and the way business is done in India. The new tax regime is set to achieve the following in coming years:
- GST will convert India into one market by seamless flow of tax credits. Before GST, some taxes were are not creditable when goods moved outside a state. Also, service tax credit was not available to a trader or a services unit couldn’t claim the credit of Value Added Tax (VAT) paid on goods
- GST will replace multiple taxes by a singular tax, making compliance easier
- GST will reduce the number of tax rates substantially. This will make life of traders easier and and tax disputes lesser
- With GST, tax compliance process will become uniform as a singular IT portal will be available where business and government agencies can interact. This will also reduce human interaction and brought transparency in operations
- As most of the taxed would be creditable, traders’ won’t have to take business decisions on the basis of tax considerations. This will bring an overall efficiency in business operations.
- The GST will substantially reduce Electronic filing and online credit matching.
- The GST would boost honest businesses.
GST would prove to be a win-win situation for the entire country, bringing benefits to all the stakeholders of industry, government and the consumer. Experts believe that the GST would reduce the cost of goods and services, boost the economy and make the products and services globally competitive.
The destination based tax follows a multi-stage collection mechanism wherein tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of the transaction. This provision would shift the tax incidence near to the consumer and benefit the industry through better cash flows and better working capital management.
Secondly, GST is largely driven by technology, reducing human interface to a great extent and leading to speedy decisions.
Boost Make in India
The government believes that GST will boost ‘Make in India’ initiative by making goods and services produced in India competitive in the national as well as international market.
Under GST regime, all imported goods will be charged integrated tax (IGST) which is equivalent to Central GST+State GST. Thus the new tax law would bring equality with taxation on local products.
As per GST law, exports will be zero-rated in entirety, unlike the present system where the refund of some taxes may not take place due to fragmented nature of indirect taxes between the Centre and the States. It will boost export of Indian goods in the international market.
Under GST regime, exporters with a clean track record will get rewarded by getting an immediate refund of 90% of their claims arising on account of exports, within seven days.
Boost government revenue
GST is expected to boost Government Revenue by widening the tax base and improving the taxpayer compliance. GST is also likely to improve India’s ranking in the Ease of Doing Business Index and it is estimated to increase the GDP growth by 1.5 to 2%.