India made a giant stride on August 7 when the Lok Sabha passed the Goods and Services Tax (GST) Bill, 13 years after the idea was first mooted. The Constitution (One Hundred and Twenty-Second) Bill 2014 and Amendments were approved after all the MPs present voted in favour. The Bill will now have to be ratified by at least 50% of the states to become an Act. The government is targeting April 2017 for the roll out of the new tax regime.
The new regime will absorb all the existing duties and taxes into one single tax. Some of the existing tax and duties are like the Central Sales Tax, Value Added Tax, Luxury Tax, Entertainment Tax, Entry Tax, Service Tax, Excise duties etc. In the existing non GST system all these taxes are calculated on the amount that is already taxed at another point. Therefore it results in ‘tax on tax’ at the later tax points. The GST will address this issue and bring down the burden of tax.
The biggest gainers of the GST will be the consumers and the Prime Minister stated that the GST will stop “tax terrorism” and also make “consumers the king”. The existing varying tax laws in the states will also become uniform once the GST is enforced which will greatly help in faster movement of goods across the states and lesser tax burdens. Except for petroleum, alcohol and tobacco there is expectation that prices of almost all the products in the market will become cheaper as the burden of ‘tax on tax’ is removed.
A non-profit NGO called Goods and Services Tax Network will be responsible for setting up the IT infrastructure both at the front end and the backend. The set deadline for completion of the IT network is the by end of 2016. Thereafter GST will have new account numbers for all the existing registered tax payers with a fully computerised system that will ensure the smooth tabulation and taxes payable. The existing CST/VAT account holders are expected to be auto-migrated to the new system before the rollout happens and new registrations will be done side by side.
The only apprehension is if the deadline of can be met, since it is just 8 months away with the other associated rules for the states yet to be formulated and passed. The training and capacity building on the new system would also involve a huge mobilisation of manpower and there is apprehension if the human resource would also be ready by April 2017. However, all in all the country will be taking a whole new step with the GST and it is expected to propel the growth of the country with an increase in its GDP. It is one of the most remarkable and welcomed economic reforms that the country has witnessed in a long time.
