Saturday, 28 November 2015

GST - An Insight

- Naba Raj Chetri.

The much discussed GST (Goods and Services Tax) is again a political hotcake in the recently commenced winter parliamentary session . Considered as the single biggest  tax reform, it is supposed to simplify the multiple taxation system present in India.

What is GST?
GST is basically an indirect tax that brings most of the taxes imposed on  goods and services like central sales tax, state sales tax, license fee, entry fees,  under a single roof in the national level. In GST system both Central and State GST will be charged on manufacturing cost which will be collected at the point of sale. With its implantation manufacturing tax will dip from 28% to 20%, and service tax, which is at 14 percent will rise to 20%, but there will still remain a 2-4% benefit for the consumers and it is supposed to bring down all prices by 1.5-2%. Ease of doing business is supposed to be much stress-free as various hidden taxes will be eliminated.

HISTORY
The GST bill has been deterred for the past 15 years. In 2000 the Vajpayee government setup a committee headed by Asim Dasgupta, which had the task to design the GST model and overseeing the IT backed preparedness for its rollout.

In the budget speech of 2006-07 of P.Chidambaram, the proposal to introduce national level GST by April1,2010 , was mooted.

This Bill was passed in the Lower House on 6 May,2015, receiving 352 votes for and 37 votes against the motion. The Government tried to pass it in the Rajya Sabha but the house was stalled and the bill couldnot be passed.

This bill also comes with an equal share of advantages and disadvantages. Few of them are discussed below:

Advantages of GST
  1. It is a transparent tax, customer will know exactly how much tax they are paying. It reduces the number of indirect tax.
  2. Tax collection is expected to rise by 30-40% and growth rate is supposed to reach double digit figure.
  3. Biggest benefit will be that multiple tax will be done away with and brought under GST. Ease of doing business is better as there are no hidden taxes.
  4. The average price of consumption is supposed to decline by 1.5-2%.
  5. By decreasing the price of commodities, the domestic consumption will increase, resulting in more productivity and hence more profit for the companies too.

Disadvantage of GST
  1. Leaving out petroleum products, electricity and real estate as mentioned in some reports can hugely undermine the whole purpose of GSTs.
  2. Producer states like Maharashtra and Gujarat are opposed to the idea of GST as it is destination based consumption model.
  3. It requires strong IT(Information Technology) infrastructure at grass root level, which is essentially lacking in India.


Many previous deadlines for the implementation of GST has been missed, the present date of April 2016 as given by Narendra Modi led government is also likely to be missed and it may extend upto October,2017. The government has already awarded Infosys Rs.1380 crore contract for building and maintaining the GST technology. The Government is all guns out and willing to pass the present GST. With a little reform in card, GST could really be the game changer that Indian Economy had been longing for in a very long time.
 * The Data remains true as on 29th November, 2015; Readers are to keep themselves updated about changes in the Bill.