GST – A boon or bane ?
What do you feel when you see the picture of this sample bill ? Everytime we see our restaurant bill we have an irksome feeling that “Oh my gosh!” I ate for 2000 bucks and still I have to pay 500-600 extra because of some complex set of taxes levied by the restaurant. Due to time crunch and embarrassment that what will others think about us, we don’t even bother to ask why these multiple taxes such as service tax, VAT etc are levied on our bill.
A one stop solution to all such worries is the GST or the goods and service tax. Now the question is what is GST ? How will it benefit us ? To put it in simple words – GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. It’s a unified tax that will eliminate multiple tax levy and make the process much smoother. But there are always two sides of a coin. So, it becomes logical that we analyse both the pros and the cons of GST.
Why GST can be a boon for the indian economy –
From complex to easy –GST simplifies the complicated taxation by eliminating 15-17 indirect tax levies.
E-commerce boost – Some of the states tend to levy complex restrictions that can hamper the E commerce business so much that some of the sellers avoid shipping products to particular states. This will end with GST.
GDP Uplift – With the elimination of the cascading effect of tax rates, Economists hope that GDP will improve by over Rs 100,000 crore.
Boost for the manufacturing sector – A clarity on taxing policies , switch from a fragmented to a common market and fall in the logistics cost, will cumulatively provide a major boost to the manufacturing industry.
Ease of doing business – With multiple taxes like octroi, central sales tax, state sales tax, entry tax, license fees, turnover tax etc subsuming into GST, doing business in India will become much easier.
What can be the potential drawbacks of GST –
Not an ideal GST- An ideal GST should have the same rate across all the states. But this might not be the case in the long run. States might ask for some additional levies or exemptions depending on what they feel is right for their state.
Revenue compensation to the states – It has been decided that the states will be provided complete compensation for any revenue losses that they’ll incur due to tax changes. The problem is that how these revenue losses will be calculated.
Misinterpretations – There can be many misinterpretations when we shift from one tax system to another. These can lead to disputes and litigations.
Not a Single tax – GST is not a single taxation system. There are 3 parts to it.
– Central GST – which will be levied by the centre
– State GST – which will be levied by the state
– Integrated GST – which will be levied by Central government on inter state supply of goods and services
1st April 2017 is an ambitious target set by the government for implementing GST. There are many hurdles which have to be crossed before making GST a reality. Getting consent of the states, agreeing upon a GST rate in accordance with the propositions put forth by political parties are barriers which have the potential to delay GST implementation.
All we can hope is that on 1st April 2017 rather than becoming april fools, we witness the biggest reform in the history of Indian economy which has the potential to make India soar to great heights.