On Monday India rolled out a major tax reform – the GST bill finally saw the light of the day with the lower house of the Parliament passing the Bill. PM Modi described the event as historic and termed GST will end ‘tax terrorism’. While the initial euphoria is understandable, and the Government has crossed a major hurdle, the actual dividends will start percolating once when things firm up in the next two years. But as of now, the second step involves the GST Bill to be ratified by the respective State assemblies – at least 16 of the 29 States must ratify it, so that a pan India unified tax regime can be created.
PM Modi remarked that with the passing of GST makes consumer the king. In a way he is right, because GST will eliminate all forms of indirect taxation. Experts say that there are 7 major types of indirect taxes in India: Service Tax, VAT, Excise Duty, Securities Transaction Tax( STT), Stamp Duty, Entertainment Tax and Customs Duty. GST will merge all of these into one unified tax.
Today 140 countries across the world follow GST with France being the first country to adopt GST. India joins this league and clearly it’s a boost to Indian economy- both exports and imports are bound to benefit from a unified tax structure.
According to Tax experts they say that GST being a destination based tax would specifically reduce the tussle amongst the origin state and the destination state, often seen to be warring to appropriate the same tax transaction. GST would also put to rest the ambiguity surrounding the treatment of ‘intangibles’ such as software and the concept of dual levy of taxes per se. Further, with manufacture no longer being a taxable event, the concept of deemed manufacture and/or MRP valuation would be rendered redundant in the GST era, sparing businesses of the often long-drawn litigation process.
K.R. Sreenivasan,Founder, Director at Infoholic Research says, “ Passing of the GST bill offers quantum of promises to lift the rising Indian economy and unifying it as a single competitive market. A fresh air will be breadth into the business sectors as GST will substitute Central Excise Duty, Service tax, VAT, octroy etc. As cascading of tax will be eliminated by GST, prices will reduce and propel the GDP of India to new heights. Foreign players that were jittery in expanding pan India owing to non-uniform tax system will find great relief and venture out to all states. Same thing goes for Make in India and Start up India as companies will get equal opportunity based in every state or region of the country.”
“However, various sectors currently operating in India are going to get impacted. The industries that will benefit are Auto Media & Entertainment and Consumer Staples. Meanwhile, taxes on Banking sector, Consumer discretionary, Telecom and Pharma sector will go up and this might have some effect in consumers. Sectors like cement, metals and transportation will not see any major bearing as change in the rate of tax is minimal even after GST in these industry segments,” adds Sreenivasan.
Rajeev Wadhwa, Group Chief Executive Officer and Chairman, Baron Aviation reflecting on the on the impact of GST bill on the charter industry (general aviation) says, “ “We need to see the impact of GST on services and trading businesses. Some of these businesses are very cost sensitive and even 10% difference due to added price can result in negative growth for the industry. Charter trading is one such sector that is likely to impacted by the GST bill, and not in a good way. We must also look at the positives – charter industry reflects the state of the economy, if inflation comes down and Indian businesses start performing better, it will bring in positive sentiment as a whole. Let us also check the impact on ground handling , airport charges and MRO to take holistic view of our industry.”
Jaswinder Ahuja, Corporate Vice President & Managing Director, Cadence Design Systems India says, “ We welcome GST. It will help herald a more comprehensive and congruent tax structure benefitting the electronics and semiconductor industries and the business communities at large. As the market opportunities for electronics keep getting larger, especially in a growing economy like India, GST will encourage in the seamless transfer of goods and services across the country. It will also give a boost to the ‘Make in India’ campaign.”
G.V. Kumar, Founder, CEO & Managing Director, XIUS says, “The adoption of GST is certainly a bold step after the economic liberalization and will follow it in working wonders for the overall economic development of our nation. The telecom sector, particularly from the Network Services perspective, is also expected to benefit under a uniform tax regime since streamlining of resources and financial planning can be managed in a more efficient way under GST. It will also outdo the multiple taxes applicable on the telecom sector and will help in driving further the interests of internet services for the common man.”
“The IT-Electronics industry at large welcomes the proposed move to the GST regime, as the same would herald a new beginning in the indirect taxation landscape of modern India, paving the way for a simplified and homogenous tax structure for goods and services,” says Nitin Kunkolienker, Vice President, MAIT and Director-Corporate Affairs, Smartlink Network Systems.