GST

By now you would have woken up to the news that we are following GST and being implemented of the biggest tax reform in India since 70 years. GST has replaced at least 17 federal and state taxes to implement a single and unified tax – Goods and Services Tax. The reason that our Hon’ble Prime minister Mr. Narendra Modi was vouching frequently for bill to pass because it will help to increase at least 2% in the current GDP and that is a huge amount in itself, stemming India as one of the fastest growing economies in the world.  

For long India’s tax system had layers of direct and indirect taxes which added somewhere between 25% and 40% to the COGS. Currently, abolishing all the taxes in between, GST is pegged at between 18% and 28% that is not huge amount comparing with previous tax system. it is claimed that GST will be a simplified form of taxation that will achieve the multiple the objectives of the following

• Lowering tax burden;
• Expanding the tax base; and
• Increasing tax collections
• GST will also help to build a transparent and corruption free tax administration.
• Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.

Having said the that all good objectives there are some disadvantages people identified

• Some Economist say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.
• Some Experts says that CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST. Hence, there is no major reduction in the number of tax layers.
• Some retail products currently have only four percent tax on them. After GST, garments and clothes could become more expensive.
• The aviation industry would be affected. Service taxes on airfares currently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate

Of course there will be starting troubles if we implement new reform, it does not mean that law is not efficient. I hope GST will bring transparency in taxation system