Goods and Services Tax is an indirect tax reform, which aims to remove tax barriers between states and create a single market. However, now the industry veterans which also have kept their fingers crossed for the favourable final rate of GST.
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All said and done, the April 2017 roll-out date appears to be more realistic now.
Going forward, with the introduction of the new law, businesses will be motivated by the uniform tax structure. On Twitter, he said this reform would help the “Make in India” initiative aimed at turning the country into a manufacturing hub, boost exports and thus increase employment while providing enhanced revenues. “The GST would have been more homebuyers” friendly if stamp duty had also been subsumed into it. “While we are defying that trend, for the first time in history, we are coming out much better than the rest of the world, having missed so many historical opportunities”, he said at the convocation ceremony of the O P Jindal Global University.
Asked about exemptions to be given under GST, he said exemptions are supposed to be eliminated under the GST regime.
Stripping the right of states to set their own tax rates means that they will have less leverage to attract big business with favorable rates. With the current deliberations around GST rate being 18% to 20%, there could be a reduction of tax incidence for several product categories. The move is considered as a historic tax reform which will transform India’s Dollars 2 trillion (or GBP 1.5 trillion) economy by bringing the South Asian country’s 1.25 billion consumers into a single market for the first time.
Analysts expect massive warehouses to now come up across India as the likes of Amazon and Flipkart would find it easier to do business with a single rate of tax applicable on their products.
“This is a reform on the scale of the 1991 Economic reforms that changed the entire DNA of the Indian Economy”.
“This is likely to negate the beneficial impact of e-commerce on lakhs of small businesses in the country by compelling them to seek refunds compounding their working capital problems”, it added. Consumption taxes are the exclusive domain of state governments.
Meanwhile, the GST Bill will be taken up by the Lok Sabha tomorrow, with virtually all political parties backing this legislation. “We believe, the estimated decrease in the now effective indirect taxes once the GST is finally implemented will drive the next phase of growth in the industry and the benefits of the lower tax rate, which shall be passed on to the customers in the form of reduced prices of the product line, will surely eliminate the current weak demand scenario in the market”.
‘Multinationals incur huge inefficiencies of running factories in multiple states producing the same goods, purely to overcome the restraints of tax borders’. Therefore, it is appropriate time for the industries to gear up and strategize the integration of GST into their operations. If GST is implemented on a higher rate then it will act as a dampener for the overall industrial growth in the country. “Also, the requirement of compensation to be given will have to be included while calculating share of central government in GST”, he said.
It was then that Congress opposed the GST bill. “We will have to fit services in the slab which is neither too high or low at the time of deciding the final rate structure”, he said.
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The implementation of nation-wide GST, will have remarkable impact on every sector of the economy. “Apart from creating seamless market across the country, the GST can also become instrumental in making the industrial scenario favourable for the consumers, as they are expected to be hugely benefitted by the creation of unified market”, added Mr. Bharat Aggarwal, Managing Director, Sheetal Group.
