India biggest reform, Goods & Services Tax scheme implementation is a little bit closer, Combine a number of central and state indirect taxes into a single levy. The finalisation of rate structures for goods and services, although subject to formal approval by the GST Council, has set the ball rolling for a pan-India GST roll out by July 1. As the GST Council has finalised the rates of the new tax for most goods and services, the companies and the other tax payers must start adjusting their accounting systems to roll out the new tax at the earliest. The implementation of GST will allow free flow of tax credit in intra and inter-state transactions leading to more efficient markets and leaner tax structure. Following are the changes that the economy, the government & the common man will witness post implementation of the new indirect tax system:
Prices Are Neutral for Most of the Goods
However, for certain food, agro products of daily use like soap, hair oil etc. the new price are considerably lower. As a result the overall impact is likely to be inflation neutral.
Changes of Process to Taxman & Tax Payer
Tax controlling will be easier on account of the strong GST Network platform where all returns will be accessed quickly in a user-friendly manner. This will help revenue officials in monitoring the sequence of supply of goods and services as well as flow of input tax credit.
Gross Domestic Product & Government Finances
In the short-period, GDP growth is unlikely to receive a booster as the adoption of a brand new indirect tax structure will entail a meaningful disruption. From the Government finance point of view, Central Government finances will be unfavorably affected in FY18 as it will have to pay compensation to supplier-state.GST can increase working capital requirements across manufacturing sectors on account of tax liability on inter-state tock transfer’. Accordingly, businesses will not be able to claim their tax credits until the delivered goods are sold
Improvement for the Organized Sector
Need for registration and filing of returns in many states, compliance costs are likely to go increasing. This will also impact some of the smaller entities in Small and medium sized dominated sectors. Over the long-period this is likely to lead to conclude and share gain in the organized sector.
Conclusion
The rollout now appears certain on July 1, unless there is any unexpected development. The government is ready and so is the large businesses coupled with mid-size companies. There is still a month time for the rest of the businesses to be ready and get registered under the new tax scheme. GST, being ‘one country, one tax’ format, thanks to lower rates and efficient taxation and, as a result, better compliance. This implies, it will also be boost up for the Indian value as well for the medium to long term point of view.
