GST sees the light of day

Organizatio n

The long awaited Goods and Services Tax (GST) bill finally gets cabinet approval
In December, 2014, the Union Cabinet cleared the
Constitutional Amendment Bill, paving way for the introduction
and enactment of the GST in India. The Bill proposes to amend
Indias constitution, thereby allowing the central and state governments to frame laws and collect taxes on goods and services. It now needs approval from both houses of parliament,
following which it has to be
sanctioned by a majority of the
state governments, before receiving assent from the President.
Currently, goods and services
are subject to multi-layered
taxation enacted under a myriad of separate laws including
excise duty, customs, service
tax, VAT, and entertainment tax. India practices a unique dual
system of taxation at state and central level. This bill intends to
combine all indirect taxes under one comprehensive law
reducing tax complications arising due to the multiplicity of regulations, compliance requirements and litigation.
Creating a uniform tax structure in India is a challenging feat.
Indeed, this bill is widely regarded as the most important reform
since independence. It will end Indias fragmented tax structure
where each state levies tax on different commodities under different laws and at different rates. It has numerous implications,
one of the most important being the aim to equalise the distribution of taxation between manufacturing and services.
There are other perceived benefits too:

lower manufacturing costs. (Source: gstindia.com)

Tax revenues for the government are also set to increase significantly. By simplifying the administrative
systems and compliances, increasing the taxpayer base,
and reducing litigation, GST is expected to further stimulate the growth in the economy and infrastructure. According to a recent report, the government is predicting a
profit of $15bn a year by implementing GST. (Source:
gstindia.com). This will be delivered by a resulting rise in
employment, promotion of exports and a significant
boost to overall economic growth.

A few critical issues still persisthot topics of debate include

whether products such as petroleum, alcohol and real-estate
should be taxed. More clarity is also needed around the taxation
for inter-state sale of goods and the calculational complexities
arising from the central and state governments sharing of revenue and any potential tax loss compensation. Concerns regarding the rate of tax, threshold limits for exemption and place of
supply rules are still under discussion.
Implementing a completely new tax system across a population
of over 1.2 bn will no doubt be challenging. Modis government
remains optimistic and has stated that 2016 will be the kick-off
year for GST. We are now eager to hear exactly how the government will implement the new system, across the 29 states,
over the next few months.
Finally, as Kapil Dua, Director of Financial Consulting at Sannam S4 says, This Constitutional Amendment Bill is a significant step towards the introduction of GST in India. There has
been considerable debate on this law in recent years, and we
are now finally getting to see some action on the regulatory
front. GST completely overhauls Indias current indirect tax system, and will have a huge impact for doing business in India.
All stakeholders need to keep a very close watch on this subject
in the coming months.

The intent is that GST will streamline India's tax system

and create a mutually beneficial market across all 29
states, leading to increased compliance and growth in
the tax-to-gross domestic product ratio.

As a result of GST, reports indicate that economic

growth will further increase by an additional 0.9%1.7%;
exports are set to grow by an additional 3.26.3% and
imports by a further 2.4% 4.7%. (Source: National
Council of Applied Economic Research).
To learn more about the GST bill, its provisions, and how it
By eliminating the existing cascading tax impact, the will impact your organisation in India, contact us at:
average tax burden on companies is set to reduce con- consult@sannams4.com.
siderably. This will be beneficial for the corporates as the
drop in production costs will make exports more competitive.

Any decrease in the costs for goods and services manufactured within India will obviously boost exports.

The Indian manufacturing sector is one of the highly

taxed sectors in the world. This bill will eliminate the tax
complexities and will prevent the loss of competitive advantage which India has over western nations based on

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