₹ GST: Af­ter the tran­si­tion

Goods and Ser­vices Tax (GST) will en­able the gov­ern­ment to reg­u­late the un­or­gan­ised sec­tor and bring more tax pay­ing cor­po­rates un­der the um­brella

The Economic Times - - Finance & Commodities -

The gov­ern­ment has been work­ing on a de­fin­i­tive plan since it came to power and ev­ery time we see an an­nounce­ment it seems highly reg­i­mented and re­sult ori­ented. This time it was GST, where the highly con­vo­luted tax struc­ture of In­dia is un­der re­fine­ment and set to change for­ever. GST now is ap­pear­ing to be the part of a so­cioe­co­nomic over­haul­ing of our na­tion, and can truly be termed as 'fi­nan­cial in­de­pen­dence move­ment' of mod­ern times. The coun­try is poised to wit­ness a greater in­flow of funds from all over the world and from within In­dia.

The GST bill was first mooted in 2000 un­der the NDA gov­ern­ment, and the frame­work has been un­der de­vel­op­ment since then. Sig­nif­i­cant ef­forts have been made in last three years un­der the dy­namic lead­er­ship which has made the pas­sage of GST bill as a col­lec­tive re­spon­si­bil­ity and achieve­ment of ev­ery Mem­ber of Par­lia­ment. From fi­nan­cial and growth per­spec­tive it may be de­rived that In­dia has united once again to emerge as a single mar­ket with the pas­sage of GST bill.

The com­plex web of tax struc­ture is erad­i­cated and In­dia will rise fur­ther in the Ease of Do­ing Busi­ness In­dex. The com­plex and cum­ber­some tax sys­tem, which has pushed en­trepreneurs to lim­its in or­der to abide by all the laws laid by au­thor­i­ties at fed­eral and state lev­els, is his­tory now. The cen­tral lead­er­ship re­cently high­lighted that in­cre­men­tal changes may not be able to pro­vide the much needed boost to the sys­tem and im­me­di­ately a trans­for­ma­tional re­form is passed un­der the GST frame­work which will make the en­tire coun­try of 1.3 bil­lion con­sumers as one single mar­ket and will be marked as his­toric mile­stone. The much awaited GST net­work is up and run­ning, in­creas­ing the qual­ity of ser­vices. Some states, which were poor at the time of In­de­pen­dence, are still poor as they are not in a ca­pac­ity to en­ter­tain en­trepreneur­ship and hence they are not able to align them­selves on the growth tra­jec­tory. With the fed­er­al­iza­tion of the tax sys­tem un­der GST, these states will get a higher and well­man­aged pros­per­ity fund, which could bring them to the next level of eco­nomic de­vel­op­ment so that they start of­fer­ing an en­vi­ron­ment for man­u­fac­tur­ers to flour­ish.

The first month was cleared and new ship­ments were de­ferred by a month. Last day stock clear­ing sales were com­mon ev­ery­where and the stocks were moved briskly. Now that the tran­si­tion has hap­pened, lo­cal manufacturing is nor­mal­is­ing and the ship­ments from for­eign man­u­fac­tures have lined up. GST brings in var­i­ous ad­van­tages such as level play­ing field for SMEs and large cor­po­rates, wor­ryfree lo­gis­tics move­ment, zero book fudg­ing, sim­pler pro­cesses, fewer com­pli­ances, re­mov­ing cas­cad­ing tax ef­fects, reg­u­lat­ing the un­or­gan­ised sec­tor, com­pet­i­tive edge over for­eign busi­ness. All the ben­e­fits shall boil down to more busi­ness, more em­ploy­ment and higher eco­nomic growth with less has­sles. How­ever, the big­gest ben­e­fit of this is to the gov­ern­ment which will be to reg­u­late the un­or­gan­ised sec­tor and bring more tax pay­ing cor­po­rates un­der the um­brella for more col­lec­tions. This is di­rectly ben­e­fi­cial to gov­ern­ment ex­che­quer and fur­ther en­riches the spend­ing power of the gov­ern­ment and low­ers the fis­cal deficits, which in turn makes In­dia a richer econ­omy and in­creases its fi­nan­cial pro­fi­cien­cies do­mes­ti­cally and in­ter­na­tion­ally.

Ca­ble and wire in­dus­try is an­other lead­ing in­fra­struc­ture in­dus­try which is re­spon­si­ble for con­nect­ing every­thing from power to data in the coun­try. Ca­bles ac­count for al­most 82 per cent of the turnover of ca­bles and wires in­dus­try. Wires and other prod­ucts ac­count for bal­ance 18 per cent of the to­tal turnover of the in­dus­try. It is un­der­stood in the GST rules that all the CAPEX items will be sub­jected to 18 per cent GST. The rate of GST on raw ma­te­ri­als used for ca­bles and wires is fixed at 18 per cent. The ca­ble and wires in­dus­tries is labour in­ten­sive and al­ready reel­ing un­der tremen­dous pres­sure due to power sec­tor woes. Fear­ing higher GST rates on wires, ca­bles and elec­tronic com­po­nents could have a crip­pling ef­fect on the man­u­fac­tur­ers, and in­dus­try as­so­ci­a­tions have de­manded lower GST rate of 18 per cent for these key prod­ucts. While the cur­rent ef­fec­tive tax rate for these prod­ucts works out to be 18.12 per cent, un­der GST they will be taxed at 28 per cent. The prices of elec­tric wire and ca­bles are set to go up with man­u­fac­tur­ers look­ing to pass on the higher goods and ser­vice tax to buy­ers. Ac­cord­ing to in­dus­try es­ti­mates, prices could in­crease 8-10 per cent un­der the new in­di­rect tax regime.

—Lalit Ya­dav

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.