The Goods and Services Tax (GST) Bill, a recent tax reform introduced passed Lok Sabha, claimed to be the biggest reform in the taxation system in India, following the global trend India is on the way to adopt this taxation system soon.
GST bill is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the Central and State Government. By amalgamating a large number of Central and State taxes into a single tax, would minimize double taxation in a major way and pave the way for making India a single nation free from economic fragmentation.
Before GST, multiple taxes were prevalent in the economy in the form of Excise duty, VAT, etc this multiple taxation would increase the tax burden at different levels of channels of distribution. GST will increase the consumer’s real income due to the reduction in the overall tax burden on consumers, along with it GST will make a tax system more transparent.
For producers, GST will be the good option, as following a single tax system all over India would decrease the tax formalities for budding entrepreneurs as well as for the big business houses. Single tax would reduce the cost structure and thereby increasing the profit margines and help in the development of indigenous industries.
Government, by amalgamation of different taxes into a single tax will indirectly make the nation economically integrated benefiting almost every sector of an economy.
Till yet the picture is not so clear as to rate of tax to be levied in the form of GST, as claimed by Dr. Anjum Abrar, renowned economist, due to the lower tax base of the citizens, if the rate of GST is kept high to the limits of 16%-18%, benefits will not be availed to the extent as been expected.
Amalgamation of different taxes into single tax will increase some taxes (service tax) while lowering some (tax on manufacturing), this in turn will make durable goods relatively cheaper in comparison to services.
“Expenditure on long term durable goods are not done on the regular basis while services are being used on the regular basis, reduced prices of long term durable goods will not increase the consumer’s real Income to that extent upto which increased prices of services will robes away his real income. So the net effect will be more harsh than at present”, claimed Dr. Abrar.