With the GST Bill in the final stages of approval & a likely implementation from 1st July 2017, let us try and understand its significance & impact.
What is GST? The Goods and Services Tax (GST) will replace nearly a dozen central and state levies (indirect taxes) into a single national sales tax. It will make the movement of goods cheaper and seamless across the country with no inter-state taxes. It would be far simpler than the current system, where a good is taxed multiple times and at different rates.
What will be the rates? GST is expected to have tax slabs of 5%, 12%, 18% and 28%, plus a levy on taxes on luxury items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years. The GST council is yet to decide which goods & services fall in which slab. The GST rates will remain broadly in line with the existing rates. To keep inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
How will consumer benefit from the GST? With the implementation of GST, consumers will not be subjected to double taxation. All taxes that are levied while purchasing good will include both the central government’s taxes as well as the state government’s taxes. Thus there will be uniformity in products/service prices & a possible decline in prices due to some local taxes not being there.
How will the GST impact businesses? Companies will have to overhaul their accounting systems, which may involve one-time investment costs. There may also be chaos in the short term as the government gets the computer software up and running. GST Network (GSTN)—GST’s IT infrastructure arm—and CBEC together will now conduct training so that businesses know how to file their returns. Logistics companies stand to gain as it becomes easier to ferry goods across India. Impact on other sectors & services largely depend on the fine print of the GST, the tax rate they will fall under, weather it is higher or lower than the sum of current multiple taxes payable.
Steps for filing GST return…
Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’