We have been witnessing how indirect taxes have bound businesses with regard to their supply chain and other processes due to a diverse range of taxes and costs involved. India is now at the point of moving to the Goods and Services Tax (GST) system, which is being perceived as one of the most significant business re-organisations that have happened in the country.
The GST is aimed to tackle the current situation of multiple indirect taxes. It is likely to re-organise taxes, minimise bureaucratic intrusion, increase the base tax, and minimise tax evasion and contribute towards bringing down overall costs, which will be advantageous to all three stakeholders – businesses, consumers, and government.
The government is keen to implement GST by April 2017, giving appropriate time for businesses and industries to prepare and tactically integrate the new taxation policy into their processes. It is important for companies to understand the key business areas that will be impacted, keep constant track of the policy development concerning this tax, and formulate different scenarios for its application. The impact will depend on the operational topographies, size and segmentation. The changes would be notable and will require an appropriate and effective action plan as well.
The GST is a breakthrough move to further India’s efforts to better its ranking in the World Bank’s ‘ease of doing business’ index. While the primary responsibility of the implementation rests with the states, the positive magnitudes will begin to show once the challenges are overcome through an agreement between the states and the centre.
Every sector of the Indian economy will have notable consequences post the implementation of GST. The FMCG, consumer durables, automobile and needless to say, the manufacturing sector, which have been continuously inundated by various tax structures, are expected to gain some relief. GST will also hopefully provide a significant thrust to the government’s ‘Make in India’ initiative by increasing opportunities for companies to manufacture in country, given the opportunity to increase the ease of doing business.
GST is a radical and long-pending reform which will not only change the entire landscape of businesses, but also redefine the fiscal relationship between the states and the centre. If implemented tactfully with these two elements working like a well-oiled machine, GST will be etched in history as a true game changer.