The Goods & Services Tax (‘GST’), is the biggest
reform in the Indian indirect tax structure since the economy opened up, twenty
six years ago. At last, it will become a reality. The 122nd
Constitution Amendment Bill which was cleared in the Rajya Sabha last August
laid the foundation for the change. It was further cemented by the formation of
the GST Council & passage of the GST Act and Rules. Now with the GST Rates
and Transition provisions finalised, the 1st July deadline for the
radical change is inevitable.
As per the current law, businesses are required to pay
multiple taxes and adhere to multiple compliances and timelines. Once GST comes
into play, all taxes will come under one umbrella, making it much simpler for
the industry. The GST Law will also prove to be a boon for the industry that
currently has to deal with different tax processes in all different States. The
hassle of dealing with different State Governments with varied rules will be
done away with.
This tax aims to make India a single market, avoid the effect
of cascading taxes and reduce tax burden on the consumer. The key features of
this tax regime are elimination of tax on tax, lower rates, faster growth and
system driven compliances for the industry as well as the consumers.
While GST will impact various stakeholders differently, the
consumer shall be the most benefitted party. Consumer items continue to be
exempt from a levy of GST or are to be subjected to GST at lower rate as more
than 50% of the items within the consumer price index bracket are placed at a
lower rate than they presently are.
Having said the above, I am mindful that this is a complete
change for the Industry and its functioning. The way of dealing with
transactions would completely undergo a change with the new concept of supply
resulting in a paradigm shift from the age old scanner of manufacture, sale and
service concepts. This would not only entail changes in business processes, but
would completely change the accounting processes and the ERP system of every
business would require to adapt to this change quickly.
For Corporates, now the decision to set up manufacturing
operations and supply chain would be influenced not by tax benefits, but based
on business efficiencies. With destination based principle of taxation and
export to be zero rated, the competitiveness of Indian firms would surely
increase.
The law in the current form has been successful in attempting
the above. Credit should be given to the Tax Authorities and the political
willingness to achieve this by both the Houses of Parliament, State Governments
and the Finance Ministry.
With the support of the industry and the receptive consumers,
GST will be successfully implemented and accepted by India.
My sincere hope for the future is an India in
which trade is free, compliances are easier, growth is phenomenal and consumers
are satisfied. This would have been best achieved through a single low rate
structure, similar to what was originally proposed.
