A big reform and a significant game changer for the Indian economy, the Goods and Services Tax (GST), which has been a long deliberated decision, turned into a reality for the nation in 2016. With the intention to unify the nation’s financial setup, the principle of ‘One Nation One Tax’ is all about taking India, as a nation, one step closer towards an elimination of the cascading tax on tax system.
As the implementation of the much-awaited Goods and Services Tax gathers pace and is pushed towards introduction by the first quarter of 2017, it is important for businesses to be prepared and be ready well in time, so as to allow a smooth transition from the existing tax regime.
A visibly well-structured tax system, GST will bring with it uniformity and simplicity to our existing indirect tax structure. With this revision in the tax system, GST would also give opportunities to businesses to revisit and optimise their existing structure, processes, supply-chain model, amongst others.
As experienced in other countries where GST is already implemented, there could be initial hiccups and challenges faced by the consumers, as well as businesses. But one has to look at the large picture and the benefits it has to offer in the times to come.
At the same time, we must also be mindful to the reality that it could also create a bit of a challenging environment for SMEs which have limitations in terms of technology, resources, and processes. And it is, perhaps here, to encourage the SMEs that the government should ensure that the compliance requirement under the law are kept simple and minimal, so that SMEs also become a greater part of the overall supply chain. This will help to remove the cascading implications.
For the end consumer, there is a welcome change made in the revised model law. The introduction of the anti-profiteering provisions would help to curtail the sudden spike in prices of the goods and services, post GST. It would also help to monitor if the traders are entering into any unfair trade practice and if the benefits of input tax credit are properly passed on to the end consumers. To have a proper monitoring on anti-profiteering practices, a great step forward is to look into the practices followed by the regulatory bodies in other countries where GST has already been implemented.
The input and output mechanism proposed under GST law should allow revenue authorities to trace every level of the supply chain. This would help to reach and bring the unorganised sectors within the required tax ambit. Also, a robust compliance rating mechanism is likely to encourage the small vendors to be GST complaint, as big OEMs, manufacturers would evaluate and select their vendors based on the rating. This would bring the unorganised sector in the mainstream of the economy and will give level playing field to the organised players.
It is expected that over a period of time, through the implementation of this tax system, unorganised sector transactions will eventually get eliminated, while bringing with it transparency to the economy.
As is the case with most new implementations, the possibility of teething issues during its initial phases remains a possibility. That said, the implementation of the Goods and Service Tax should be seen as a national project which involves collaborative working between authorities, industries, the taxpayer, and the consumer. And in the larger scheme of things, the introduction of this system also creates in me a certain confidence that our nation is ready to take up this challenge, and for that we are ready to create some real success stories to be talked about in times to come ')}
