₹ 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 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.