Day 33 – Q 1. The implementation of post independent India’s biggest tax reform i.e. the Goods and Services Tax (GST) has completed more than a year. What are your views on the impact of GST on India’s industrial growth.
1. The implementation of post independent India’s biggest tax reform i.e. the Goods and Services Tax (GST) has completed more than a year. What are your views on the impact of GST on India’s industrial growth.
स्वतंत्र भारत के सबसे बड़े कर सुधार के कार्यान्वयन यानी सामान और सेवा कर (जीएसटी) ने एक वर्ष से अधिक समय पूरा कर लिया है। भारत के औद्योगिक विकास पर जीएसटी के प्रभाव पर आपके विचार क्या हैं?
GST the biggest tax reform in India founded on the notion of “one nation, one market, one tax completed a year on June 1 2018.
Impact of GST on industrial growth
- Simplified Transaction based Valuation: GST only considers transaction-based valuation. This makes way for easier tax calculation as well as fosters easy and simple compliance procedures.
- No additional State Entry tax:
GST subsumes the entry tax for inter-state transfers. This will benefit consumers by reducing the cost of goods and services. Earlier, suppliers had to pay entry tax when the respective supplies crossed interstate borders. Entry tax changed with borders. This entry tax would trickle down to the end customer as an addition to the actual Selling Price of good. GST increases consumer benefits by eliminating such tax structures by bringing all states under a single unified tax umbrella.
- Improved Cash Flows:
GST enables manufacturers to claim input tax rebate on goods. This facilitates continuous cash flow that indirectly drives growth. However, the time taken to credit input tax rebates to respective accounts must not be long enough so that it drives SMEs out of operations.
- Single and Simple Registration Process:
Under the old regime, manufacturers needed to register for each and every manufacturing facility separately irrespective of the fact that they might be within the same state boundaries. GST eliminates this loophole. Now manufacturers need not register separately. Rather they need to do a single registration for all manufacturing entities within the same state. Of course, different state-entities will require separate registrations under GST too.
- Cascade Effect Free Tax Structure
Prior to GST, if you were a manufacturer, you were bombarded with a wide spectrum of tax. SMEs in manufacturing were subjected to Excise Duty of 12.5%; Central State Tax of 2% and at times 5.5% VAT was also levied. GST eliminates this cascading structure by fixing the GST rate at 18%. Also, GST facilitates claim of inter-state transaction taxes. All these enable manufacturers to lower the cost of production. Manufacturers can now pass on the benefits to consumers in the form of reduced prices.
- Efficient supply chain:
In a first of its kind move, GST regime requires manufacturers to restructure their supply chain. Previously, supply chain was designed to escape Tax regimes. GST being a single tax regime force business to deploy supply chain structures that increase business and service efficiency. Supply Chain Systems will now be more efficient and put customer service on top priority.
GST was a complete overhaul of the existing system. The backbone of the new TAX System is the GSTN Network. The GST implementation is not an easy task and occasionally encounters technical glitches as well as taxpayer’s grievances
1) Immediate Working Capital becomes a necessity for manufacturers under GST. Stock transfers are treated as supply and hence attract GST irrespective of advance or no payment. Following points further cement the above statement:
- Interstate or intra-state stock transfers attract substantial Excise Duty on the removal of Goods
- Branch transfers and depo transfers are taxable under IGST
- Receipt of Advance is taxable as per GST rules
2) GST facilitates input tax credit and tries to minimize manufacturer tax burden. However, in order to increase TAX Compliance GST employs a very strict and tedious transaction management system. Deploying an efficient transaction system requires a skilled workforce, additional resources. This puts an extra burden on manufacturers and other traders.
GST is a welcome move by the Central Government for economic growth of India. GST also empowers people to be master of their destiny. Business leaders can now drive positive and impactful growth backed by transparent GST-compliance.
Best Answer : Aniket Sachan: