India, say hello to GST! Biggest-ever tax reform comes into effect
With a gong sound at midnight in Parliament’s Central Hall, India switched to GST, the single biggest tax reform undertaken by the country in 70 years of independence.
Launching GST, President Pranab Mukherjee said it is a momentous event for the nation. “This historic moment is the culmination of 14-year-long journey that began in December, 2002,” he said.
Touting it as a gamechanger, PM Modi said GST will put India on path of a system that will be transparent, simple , and keeps tabs on corruption.
“GST is the outcome of a thought process over several years,” Modi said, thanking the GST council behind this landmark tax reform. GST does not belong to one government, it is a collective effort.” The one national GST unifies the country’s USD 2 trillion economy and 1.3 billion people into a common market, an exercise that took 17 tumultuous years.
“GST will end tax terrorism and inspector raj, two big hurdles to the country’s growth,” Modi said.
GST replaces more than a dozen levies with a new goods and services tax. That should help reduce the immense power India’s myriad middlemen wield at state borders, free up internal trade, make it easier to do business and widen the country’s tiny tax base
1) It gives the country one uniform tax, and no frequent rate changes
2) A lower tax burden. One market to help businesses. No truck queues at state borders
3) GDP could rise by 2%
4) Less scope for evasion, which means higher revenues
5) Lower taxes to boost exports
6) Inspector raj will ease its grip
2) Multiple registration in different states
3) Confusion over how the tax will work out, as well as filing
4) Apprehension over existing stocks
5) Fears of anti-profiteering unleashing inspector raj
What it means for businesses
1) No fear that a state will randomly raise taxes
2) Transparency in taxes
5) Goods and services providers will get the benefit of input tax credit for the goods used, effectively making the real incidence of taxation lower than the headline taxation rate.