IT'S ONE YEAR !!!!!!
On the night of 30th June 2017, India has rolled out one of the significant reforms, tax reform to be specific for rationalization of taxes known as “Goods and Service Tax” by subsuming about 40 plus different taxes (including various cess) into a single tax. Though it is dubbed to tax reform, in reality, it is a business process reform, and for the trade and industry, it was more or less like a knee-jerk reaction as they were not sure of the rollout of the same as it is being discussed for decades. Those who have braced for the implementation of GST were transacting without any hassles and others were running to figure out the things and how to fix them.
The rollout of GST has also brought a new dimension in the Indian Politics known as cooperative federalism as there was census among the states in all the 27 GST council meetings. Our country has diversified requirements, and in this process, the states have given up something and gained something. Say for example Punjab which is basically an agrarian state has given up the taxation on food items even though it has an impact on the state’s economy and others states gained like where they are consuming states like UP, Kerala, etc.,
No reform will be successful in a day or in a year, and the impact can be accessed in medium to long term but in the short term. It is only a year of the rollout of GST, and we cannot conclude that it is a failure or a success. If we see the registration of taxpayers in the Country prior to GST and post-rollout, it has galloped from 64 lac taxpayers to 1.14 crore taxpayers that mean an addition of 50% of taxpayers which is a good sign. As advocated by KAUTILYA in his Arthasastra that tax rates should not be a burden on the taxpayers or the citizens but the tax base should be increased to have more revenue, and from there the Government should pick up the clue and reduce the tax rates once the tax base has increased. This will be possible over a period of two to five years.
One good thing in the GST is, the Government is listening to the trade and industry and addressing them at regular intervals, it shows the will of the Government and also the state finance ministers to address the need of the hour. As a result of it, till now we had about 300 notifications, circulars and orders being released. Apart from that lot of FAQ’s and industry-specific issues are also addressed. All these seem to be right from the trade and industry perspective, but from a common man’s perspective it is lacking, maybe that could be the reason that GST is not being appreciated. The items taxed at 18% or 28% is not a higher tax compared to the previous regimes where we had 12.5% Central Excise and about 14% of Value Added Tax, the end consumer was seeing on the taxes levied by the retailer and not the excise duty is paid by the retailer indirectly he/she was paying. This is the misconception even after one year of the rollout of the people are having; this has to be addressed so that the common man is aware of the same. In this context, the Government should follow the Australian Model where it has done a lot of education programs and also ensured that the pre-GST price and the post GST prices are displayed.
Another significant benefit of the GST is the removal of the check posts at every state’s entry and exit points; this has reduced the travel time of the goods and also the unaccounted expenses for the trade and industry. This helps in better planning and even inventory management to minimize the holding costs of the inventory and also in the re-warehousing. As on date only a few companies have really exploited these provisions and able to add value to the shares holders. Indirectly this should also result in the reduction of the prices but the same is not being seen as the increase in the fuel prices has negated it, that means there is no overall impact and ensured that inflation is under control.
COURTESY: TAX GURU
COURTESY: TAX GURU
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