“The GST will support economic activity and government revenues over the medium term by removing a key hurdle to the smooth movement of goods and services, and reducing corporates’ and the government’s tax administration costs, thereby improving compliance and raising tax receipts”, it added.
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The GST will replace a patchwork of central and state levies on goods and services and is one of the right-wing Bharatiya Janata Party government’s biggest reforms since taking power in May 2014.
Shares of automakers rose as the heavily-taxed sector is expected to be one of the biggest beneficiaries. Clearly, a successful GST in India will be a minor miracle. A GST will tax consumers rather than producers and effectively create a customs union between 29 states. Simplification and uniformity of taxes on Services and Goods had been sine-qua-non for ensuring and enabling business and manufacturing to grow and flourish. “According to HSBC estimates, the reform will add 0.8 percentage points to the country’s growth within three to five years”, it said. “It will impact the entire economy”, said Mr Rajeev Dimri, leader of indirect tax at consultancy BMR and Associates. This tax will be accrued to states from where the supply originates.
Why did it take forever? Moreover, most manufacturers have set up their plants in states that offer them subsidies. Other significant amendments relate to compensation to States and the dispute resolution machinery.
“We suspect that the government could bring both the bills as money bills so that there is no debate in Rajya Sabha” where it does not have a majority, he said. After deletion of the 1% additional tax on all inter-state supply of goods that was proposed in the original GST Bill passed by the Lower House, the Upper House approved the GST Bill unanimously.
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It is then a unusual turnaround in a matter of two years as finance minister that Jaitley should be talking in favour of the tax-and-spend doctrine. Yechury has demanded to cap the GST rates to 18 %. The actual tax is still some way off, however, with the government targeting April 2017 for its introduction, a date many experts say is overly optimistic. “Although the implementation of the bill in the financial system is much awaited, we can be hopeful of reaping its benefits in near future”, RS Jalan, managing director of GHCL, which is into textiles and chemicals businesses, told Fibre2Fashion.
