Update on Goods & Services Tax (GST): ASSOCHAM

The introduction of uniform Goods and Services Tax throughout the country is now on horizon with passing of the 122nd Constitution Amendment Bill by Lok Sabha yesterday.

GST will replace multiple indirect taxes levied by central and State Government such as excise duty, service tax, VAT, entry tax etc. It is going to change the way people do business. If it is properly administered it will increase GDP rate by 1 to 1.5%, Tax-GDP ratio up to 2% and reduce the cost of indigenous goods up to 10%. Hence it is win-win for all stake holders including industry, State and Central Government revenue and the consumers.

ASSOCHAM’s expert group led by Mr. Nihal Kothari met the Standing Committee of Parliament on 17 April and made detailed presentation on the urgent need to introduce GST and submitted suggestions on the 122 Constitution Amendment Bill which were well received by the Committee. ASSOCHAM has been associated with the GST initiative of the Government since 2007 and has been catalyst in bringing consensus among stake holders on GST. It held more than 40 conferences in different cities to share knowledge on GST.

The proposed GST will be uniform across the country which will reduce the cost of compliance and litigation. Availability of seamless credit throughout the value chain will remove the cascading effect of taxes on cost of goods and services thereby making indigenous manufacture more attractive. Consequently the import and export parity will change under GST regime.

The investors need to take note of this mega tax reform while making any investment in India as the cost of doing business in India will change significantly. GST will change the way enterprises do business in India. It will lead to consolidation of manufacturing to get economy of scale without any tax disadvantage & efficiency in supply chain.

The existing businesses will have to restructure their business structure and processes to remain profitable and competitive. This mega change will have significant opportunity to leverage on GST and do value analysis of their business model and processes and re-engineer to optimize benefit.

In the short term the transition to GST will need to be managed efficiently to ensure tax compliance and to protect unutilized tax credits while ensuring continuity of business without hiccups.

Source: ASSOCHAM

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