At midnight, India got its biggest tax reform

Goods and Service Tax (GST) is the most significant tax reform introduced in the history of India’s fiscal evolution

GN Bureau | June 30, 2017


#tax laws   #Reserve Bank of India   #RBI   #Goods and Services Tax   #GST  


At the stroke of midnight hour, India got converted into one seamless market, with multiple taxes being replaced with singular Goods and Service Tax (GST).
 
GST was rolled out in an event held at the parliament’s Central Hall, an effort to evoke memories of then prime minister Jawaharlal Nehru’s “Tryst with destiny” speech.
 
The Congress boycotted the event, saying no functions have been held at midnight in the Central Hall except the Independence Day celebrations in 1947, and its silver and golden jubilee programmes in 1972 and 1997. The Congress is also unhappy with the BJP over the growing attacks on minorities, dalits and farmers.
 
Trinamool Congress, the Left and DMK too did not attend the event. The opposition leaders highlighted the protests against GST across the country.
 
GST came into force across the country, except the state of Jammu and Kashmir where there is still a question mark over its implementation.
 
The Vijay Kelkar Task Force of 2003 had recommended: “An All-India goods and services tax (GST), on the basis of a ‘grand bargain’ with States, whereby States will have the concurrent powers to tax services, subject to certain principles that will help foster a national common market.”
 
After 14 years following that recommendation, GST was finally rolled out. GST is essentially a comprehensive indirect tax on manufacture, sale and consumption of goods and services across the country and it replace taxes levied by the central and state governments.
 
 
KPMG says that GST is one of the most significant tax reforms introduced in the history of the Indian fiscal evolution.
 
It will convert India into one market by seamless flow of tax credits. Also, multiple taxes to be replaced by singular tax will make compliance easier. The number of tax rates to be reduced substantially making life easier and disputes lesser. Compliance process to become uniform due to singular IT portal where business and government agencies interact – this can also reduce human interaction and bring transparency in operations.
 
The GST bill had a difficult journey. The budget of 2006-07 had announced GST by April 1, 2010. An empowered committee of state finance ministers, headed by the then West Bengal finance minister Asim Dasgupta, had submitted report to the central government in April 2008. Since then it had been a legislative challenge, which finally culminated with its rollout at a midnight event.
 
According to ey.com, GST will be a game changing reform for Indian economy by developing a common Indian market and reducing the cascading effect of tax on the cost of goods and services. It will impact the Tax Structure, Tax Incidence, Tax Computation, Tax Payment, Compliance, Credit Utilisation and Reporting leading to a complete overhaul of the current indirect tax system.
 
GST will have a far reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services; supply chain optimisation; IT, accounting and tax compliance systems, it said.
 

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