GST breakthrough: India's biggest tax reform

New Delhi: Passage of GST Constitution Amendment bill by the Indian Parliament is a sure shot “game-changer" and India’s biggest tax reform till date. It is a significant milestone in efforts to improve the country's ranking in World Bank's ease of doing business index. It is claimed to be one stop solution for multiple taxation system of India and once implemented can help economy in removing various tax related bottlenecks.

About GST

India’s tax system presently consists of direct taxes, such as the income tax, and indirect taxes, comprising numerous central and state levies such as value added tax, sales tax, octroi and luxury tax. The GST will bring these indirect taxes under one umbrella. This is a significant milestone in India's ongoing efforts to improve its ranking in the World Bank's ease of doing business index.

GST is a game-changer that will boost economic growth by streamlining domestic supply chains and removing the compliance burden of contradictory state tax regimes, the council said.

Ease of doing business

This is a significant milestone in India's ongoing efforts to improve its ranking in the World Bank's ease of doing business index, it said.

The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016.

GST is a game-changer that will boost economic growth by streamlining domestic supply chains and removing the compliance burden of contradictory state tax regimes, the council said.

The introduction of Goods and Services Tax (GST) would be a significant step in the reform of indirect taxation in India. Amalgamating several Central and State taxes into a single tax would mitigate cascading or double taxation, facilitating a common national market. The simplicity of the tax should lead to easier administration and enforcement.

What’s in store for consumers?

From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 250 percent – 30 percent free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent. GST is also likely to make goods cheaper for consumers, increase competitiveness of Indian exports in international markets and boost India's GDP growth by 2 percent.

As per the decisions made by all will of GST Council on November 3rd, 2016, the tax rates would be at 4 slabs of 5 percent, 12 percent, 18 percent and 28 percent. Luxury and demerit goods will be taxed at 28 percent plus cess.

This far-reaching reform places India at the cross-roads of an incredible economic opportunity.

The Constitution (One Hundred Twenty second Amendment) Bill, 2014 proposes a national Value Added Tax to be implemented in India from 1 April 2017

Further passage through parliament

The government is planning to introduce three bills for GST in the parliament in winter session 2016 viz. CGST law, IGST law and compensation law. There will be no GST on the sale and purchase of securities. That will continue to be governed by Securities Transaction Tax (STT)