GST will have a positive impact on economy, industry and consumers; here is why–Financial Express–26.06.2017

From July 1, GST will be in force, redefining India’s indirect tax system and reshaping the way business is done in the country. Almost two decades in the making, the new tax system represents a historic success story in our economic reforms journey.

From July 1, GST will be in force, redefining India’s indirect tax system and reshaping the way business is done in the country. Almost two decades in the making, the new tax system represents a historic success story in our economic reforms journey. While the benefits of GST to the economy, industry and consumers are well-known, it notably represents a structural reform. The process of drafting the new system was unprecedented as it took place through a committee of finance ministers from all states, taking off from the original empowered committee created in 1999 for the introduction of state-level VAT. State governments from different political parties with different ideologies came together with the ministry of finance on a single platform for the larger national good. With free discussions and consensus-building, this created requisite buy-in from all states. Such a model could be replicated for future policy development on issues such as labour reforms, land acquisition, agricultural policies, etc.

The empowered committee has given way to the GST Council, a permanent body chaired by the finance minister and mandated under the Constitution to deal with all indirect taxation (except customs duties), adding huge efficiency to the process. So far, in over 15 meetings, all decisions have been taken through consensus, without the need for voting, a commendable example of all members being on the same page.

Also Watch:

The legislative process for GST introduction too was undertaken through consultations among central and state governments in a spirit of give and take. The GST involved a Constitutional Amendment Act, Central GST Act, Integrated GST Act and Union Territory GST Act, wherein UT GST Act and State GST Acts were to be passed by each state and UTs with legislative assemblies. With a few states yet to make the enabling legislation, the laws and rules are mostly agreed upon.

Another notable point is the GST is based on a vast overarching IT network—the GST Network (GSTN). All enterprises over a certain turnover size would need to be registered on this network, and each transaction by these enterprises would go through it. It is estimated that over 3 billion transactions would be processed every month in the system, automatically matching each invoice from sellers to buyers and updating returns on taxes paid at each stage. This robust online system covers the entire country and partners with private sector players, including Infosys at the apex and 34 general service providers. The consolidated data generated from this system could feed into real-time economic policy-making.

The differentiation of players in the economy—between manufacturers, traders and service providers—would be merged as suppliers. All nodes of the supply chain adding value to a product would be part of the same system, enabling each to avail seamless input tax credit. The requirement of registration is applicable to all those with over Rs20 lakh turnover (Rs10 lakh for specified category states including Sikkim) except certain categories, operating in a single state.

A massive structural reorganisation of the administrative machinery has been carried out. The Central Board of Excise & Customs (CBEC) will now be the Central Board of Indirect Taxes & Customs (CBIC), after getting legislative approval. With almost 4,000 ranges in various divisions and commissionerates across 21 zones, the CBIC will ensure taxpayer services across the country.

GST will make India a single market for the first time, subsuming numerous central and state taxes and ensuring harmony of tax rates across the country. Apart from the larger economic gains, industry will benefit in many ways. Choosing manufacturing locations, setting up storage facilities and pricing of goods was often determined by applicable tax rates. With a product being subject to the same tax rate in all parts of the country, firms will be able to take informed decisions based on production efficiencies, wage structures and natural advantages of a location. Interstate movement of goods will become faster and cheaper as inspections at state borders will no longer be required.

With Input Tax Credit (ITC) as an incentive, the number of enterprises in the tax net is likely to go up. Enterprises will benefit from lower taxation on inputs as cascading of taxes will be eliminated, and lower prices are likely to be passed on to consumers.

The filing of returns and payment of taxes is expected to be much simpler under GST than in the current system. However, it would serve the purpose of creating a single market, if a single registration process as a centralised registration is introduced, which will lead to simplified and better tax compliance.

A related issue is that enterprises transferring goods from their storage depot in one state to their own depot in another would be considered as interstate supply and be subject to tax. Inter-branch transfers of inputs or services to other states should not be treated as a taxable supply. In addition, we have suggested that in the valuation rules, stringent valuation principles are not required and invoice value should be accepted. Also, existing tax incentives for the Northeast and Special Category States should be continued in order to encourage investments in these regions.

We hope that many rates of tax currently being introduced will converge to fewer rates several years down the line to impart more stability and certainty to the tax regime. However, the current progressive slab structure is a good beginning.

As the day of the introduction of GST draws closer, industry warmly felicitates the central and state governments for bringing out a transformative reform that will have a huge beneficial impact on the economy, industry and consumers. Industry is ready for implementing this landmark new regime.

via GST will have a positive impact on economy, industry and consumers; here is why – The Financial Express

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s