Will the GST Bill Have an Impact on the Way We Do Our Business?June 28, 2017
There is a lot of attention to the Goods and Services Tax Bill, which has been recently passed by the Rajya Sabha and the Lok Sabha. There is a lot of growing curiosity amongst taxpayers, who are busy evaluating the immediate and long-term impact of the bill, on their businesses. It is mainly because it can be genuinely coined as the ‘The Next Big Reform’ after the financial reform of 1991 in the history of Indian Economy.
Currently there is a lot of complication, specifically for businesses, while paying the plethora of taxes, these multiple taxes are also responsible for increasing the cost of goods, thus impacting the retail market and its consumption directly. Now add to this, the difference in taxes applied in each state, which only makes the entire process cumbersome.
The introduction of the GST Bill will consolidate and combine all the indirect taxes, unifying all of them into a destination base tax, thereby integrating the Indian Market. By applying this, it is predicted that there will be a rise between 1-2% of the GDP of the country.
- GST is a uniformed tax applied to goods and services across the country. And most developed nations, tax the manufacturing and sales consumptions, on similar amalgamated taxes.
- The GST has two essential components – Central and State Taxes. The Central Tax will replace, central excise duty, service tax, additional duties of excise and customs, cesses and surcharges on supply goods and services.
- The State Taxes will replace, VAT, central sales tax, purchase tax, entry tax entertainment tax, taxes on advertisements, state ceases and advertisements.
The impact of SME’s and Start-Ups:
- Easy to carry on business as GST will replace VAT across India. So businesses will not need to worry about VAT compliances.
- Fewer tax compliances and uniformity across states.
- Improved Logistics, the long lines at borders for sales tax check posts and several indirect taxes will be eliminated resulting in faster transportation.
- A positive benefit to start up’s, as the cost of production, will decrease, directly impacting higher demands internationally due to competitive pricing, which will eventually foster the growth of Indian exports.
- Foreign investments will increase, as India will become more competitive in the international markets.
In a nutshell, for small businesses, running logistics and daily activities will become easier, especially across borders nationally and eventually internationally. Business operations will become smooth enabling businesses to reduce costs and improve compliance.
GST will further bring down the fiscal deficit, as tax collection will get a boost due to simplification in the tax regime.
Critics argue that there are a few downsides to the implementation of this tax, for example, States will lose fiscal autonomy, which could lead to revenue loss. However, prima facie it looks like the benefits outweigh the alleged negatives, looking more like a win-win situation for the government and the taxpayer. Although only time will show the true impact of the GST bill.