The government also faces a race against time to introduce the tax by its deadline of next April, when the new financial year starts.
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The most significant economic reform since 1992.
Kunkolienker said that the cascading effect of taxes would be effectively addressed under the GST regime owing to seamless flow of credit, with traders, in particular, being eligible to avail credit of services such as in the case of Annual Maintenance Service (AMC) contracts.
The business welcome was well summed up by Chanda Kochhar, CEO of ICICI, a leading private sector bank. While the GST appears to have largely priced in … the sentiment around reform momentum might get a boost. “Consumers will see lower prices in the medium term, businesses will able to operate more efficiently and the government will see a broadening of its tax base along easily of tax collection”.
Industries and commercial enterprises now pay various taxes at various stages of a product or service, such as manufacture, transport, wholesale, logistics and retail. Companies’ distribution and warehousing systems will also be simplified.
The GST envisages a dual tax system.
Its passage marks a victory for Prime Minister Narendra Modi as he seeks to boost growth in Asia’s third-largest economy, and is a relief for investors, especially overseas, who had been growing impatient about the pace of reforms. The GST Council, which will be formed as per Constitution’s Article 279 (A) has the responsibility to advise the center and states on tax proposals and related legislation.
In the past few weeks however, the BJP has improved its political tactics.
The Bill was already cleared in the Lok Sabha before it was moved to Rajya Sabha, but now that some amendments have been made, the bill will have to be passed from the Lok Sabha again. It is noteworthy that the Principal opposition party has played a constructive role by articulating some of the concerns which have been noted by the government and would help form base of a robust GST framework for India.
The ruling Bharatiya Janata Party (BJP) and the opposition Congress have issued whips asking their members to be present in the house on Monday in view of the GST bill being taken up.
He said there will be three Bills on GST which would come up. At least 15 of the states must do this for the measure to be implemented.
Thousands of tax officials must also be trained in the new regime, government IT systems overhauled and companies themselves briefed on complying with the changes. Congress wants the tax capped at 18 percent. “There was a public anxiety, nearly an exasperation, over the delay”, he said.
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Revenue secretary Hasmukh Adhia said his target was for the necessary majority of states to ratify the constitutional change in the next 30 days, allowing a new GST council to finalise legislations that will set the rate and other terms of the tax. However, implementation could be messy; the GST will reduce taxes for manufacturers but increase them for service producers. At the state level, it will absorb state value added tax/sales tax, entertainment tax, central sales tax, octroi (state border tax), purchase tax, luxury tax, and taxes on lottery, betting and gambling.
