The Goods & Ser­vices Tax

Ad­vo­cate Kan­ishk Agar­wal, founder Cri­tax corp and IBAP At the verge of im­ple­men­ta­tion, here’s what all one needs to know about

Libertatem Magazine - - Contents - by Adv. Kan­ishk Agar­wal

We all have been won­der­ing what is GST ever since its in­cep­tion, haven’t we? Peo­ple in the na­tion have been quite cu­ri­ous as to how GST, un­doubt­edly the most im­por­tant In­di­rect Tax Amend­ment since in­de­pen­dence, shall roll out. The wait is now about to get over as we pro­ceed to­wards its im­ple­men­ta­tion most likely with ef­fect from 01.07.2017. GST is one com­pre­hen­sive in­di­rect tax for the whole na­tion, which shall make In­dia one uni­fied com­mon mar­ket to man­u­fac­tur­ers and con­sumers through­out the coun­try. The Con­sti­tu­tion Amend­ment Bill for Goods and Ser­vices Tax (GST) was ap­proved by The Pres­i­dent of In­dia post its ap­proval by both the houses of the Par­lia­ment (Ra­jya Sabha on 3 Au­gust 2016 and Lok Sabha on 8 Au­gust 2016) and was rat­i­fied by more than 50 per­cent of state leg­is­la­tures. The main pur­pose to bring GST is to make the tax base com­pre­hen­sive. There­fore, the ideal prepo­si­tion shall be to bring all goods and ser­vices within the am­bit of GST and al­low­ing fa­cil­ity of seam­less In­put Tax Credit. GST shall prove to be a game chang­ing trans­fig­ure for the In­dian econ­omy by com­pos­ing a uni­fied In­dian mar­ket and re­duc­ing the gush­ing ef­fect of tax on the cost of goods and ser­vices. It will bring a huge percussion at the tax struc­ture, tax in­ci­dence, tax com­pu­ta­tion, tax pay­ment, com­pli­ance, credit uti­liza­tion and re­port­ing, lead­ing to a com­plete over­haul of the pre­vail­ing in­di­rect tax sys­tem.gst will have a far-reach­ing im­pact on al­most all the as­pects of the busi­ness op­er­a­tions in the coun­try, for in­stance, pric­ing of prod­ucts and ser­vices, sup­ply chain op­ti­miza­tion, IT, accounting and tax com­pli­ance sys­tems. Some of the ad­van­tages to be of­fered by GST are briefly ex­plained be­low:

1) Ma­jor In­di­rect taxes to be sub­sumed in one tax (GST): GST shall sub­sume ma­jor in­di­rect taxes mak­ing life very easy for the con­sumer. Con­se­quently, cost of com­ply­ing with var­i­ous In­di­rect Taxes that shall be sub­sumed in GST shall also be saved. 2) Greater com­pet­i­tive­ness in the mar­ket: The bur­den of taxes shall shift from man­u­fac­tur­ers to con­sumers and hence, man­u­fac­tur­ers will be free to ex­plore more, with more free­dom. There­fore, there shall be more com­pet­i­tive­ness in the mar­ket. There shall also be re­duc­tion in trans­ac­tion costs of do­ing busi­ness, which would in the long run lead to an en­hanced re­cre­ation for the trade and in­dus­try.

3) Uni­form tax rates: GST Regime will en­sure that in­di­rect tax rates and struc­tures are com­mon across the coun­try. The VAT rates that were cut down by some of the states to at­tract more peo­ple to buy their prod­uct can no longer do so. All states shall be at equal par­lance now.

4) No con­fu­sion: All con­fu­sion re­gard­ing what is a man­u­fac­tur­ing or what is a ser­vice ac­tiv­ity will be elim­i­nated. All eco­nomic ac­tiv­i­ties will be “eco­nomic ac­tiv­i­ties” only and will be taxed. There will be no taxes on taxes. There will only be one In­di­rect tax that is GST.

5) Free­ing up: State re­stric­tions and levies of­ten do not al­low free trade and have com­pli­cated e-com­merce rou­tines. Some sell­ers are not able to ship goods to some par­tic­u­lar state due to some re­stric­tions of forms/com­pli­ance etc on goods above cer­tain amounts.. All this will end in GST Regime. How­ever, with pros come cons too. Here is what the law makers still need to con­sider:

1) In­creased mo­nop­oly of cen­tre: The au­ton­omy of state shall be com­pro­mised as the role of the Cen­tre in­creases. Cen­tre shall fix the per­cent­age of rev­enue to be shared. Some of the states might even suf­fer from a loss on the ac­count of tax sharing. 2) Bur­den on tax pay­ers: GST is def­i­nitely about re­duc­ing the cost of man­u­fac­turer thereby it shall put bur­den on con­sumer as tax credit of GST shall be re­cov­ered ul­ti­mately from cus­tomers. While all the pros and cons are just the as­sump­tions and an­tic­i­pa­tions of the state­ments of the govern­ment, we are still look­ing for­ward to the fi­nal GST Rules and hop­ing that GST shall pro­vide with cor­rec­tive mea­sures for the loop­holes which we are car­ry­ing from last many decades.

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