Constitution (One Hundred Twenty Second Amendment) Bill 2014 related to the Goods and Services Tax (GST) was passed by the Rajya Sabha on 3 August 2016.
Once applied, it will incorporate all of the country's central and state level duties and taxes, thus making the country a national market and contribute considerably to the growth of the economy. The idea is to simplify tax regulations and bring in a sense of tax uniformity across the country and leading to simplified, assesse-friendly tax administration.
The manufacturing segment in particular is expected to be a large recipient of GST as the economic system becomes more competitive. As GST will be associated with an information technology platform, the tax payment system would also be streamlined.
It’s expected the national supply chain would become quicker, unified and more efficient by allowing for uninterrupted movement of goods across the country. It is anticipated that implementation of GST from 1 April 2017 would reduce transaction costs and boost GDP by 1.5 – 2% points.
While the government has left no stone unturned to seek a consensus, the readiness and maturity of the key opposition party in terms of understanding the issues and straightening out the differences is indeed praiseworthy. Industry can now think of ‘One India’.
Expected benefits of GST:
- Uniform taxing structure across the nation which in turn will complement ease of doing business
- Greater transparency between tax agencies and businesses
- Increased confidence for foreign investors, which will increase FDI
- Reduction in cascading effect of taxation i.e. double taxation
- Widening of tax base resulting to less tax evasion and reduction of compliance cost
- Boost to investments via cheaper capital goods
- Manufacturing to become competitive; which will boost ‘Make in India’ initiative and exports out of India
- Savings in logistics cost expected
- Protection from cheaper imports, helping Indian entities
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