GST is the biggest indirect tax reform in India since 1947. It will be levied on the manufacture, sale and consumption of goods and services. According to our honorable finance minister Mr. Arun Jaitley, GST will lead to economic unification of India.
In the present taxation system of India, some of the taxes levied by the central and state governments overlap, making the present system complex. The function of GST is to transform India into a uniform market by breaking the current fiscal barrier between the states. GST will facilitate a uniform tax on goods and services throughout the country making the current system of taxation simpler. At present there are a number of taxes which comes under indirect taxes such as exercise duty, central sales tax, VAT, service tax, entry tax or octroi. The framework for GST will bring all these taxes under a single roof. According to our Mr. Jaitley, GST will help in bringing up the GDP growth by 2%.
Apart from this GST will help ensure FDI inflows and will help support our Prime Minister’s “Make in India” project. The present taxation system is plagued with multiplicity of taxes- and different rates and at multiple points. Being a destination based indirect tax GST will bring the much needed certainty and uniformity in tax rates. This will offer a solution to the complex tax problem in India and will increase the ease of doing business here.
Apart from bringing down the cascading effect, GST will also reduce the tax evasion. As the GST is payable only one time, so it will make the tax evasion difficult and will also help the government to find out the tax defaulters easily. GST will thus help in achieving the transparency and accountability to a large extent.
One of the problems that GST is facing is the state government’s fear of losing revenues and fiscal powers. However, the constitutional amendment bill promises to solve this issue by giving compensation to the state governments for any kind of revenues lost for three years.
During the budget speech, Mr. Jaitley promised that GST will be implemented in action from 1st April,2016. As the current government has majority in Lok sabha, therefore, the GST bill was passed in the lower house on 6th May,2015. However, due to the lack of majority in Rajya sabha, GST hit a roadblock in the Upper house. It appears that it is highly unlikely that GST will be a reality on 1st April,2016.