G.S.T – ONE INDIA – ONE TAX - A REVOLUTION IN INDIAN TAX SYSTEM!

G.S.T – ONE INDIA – ONE TAX - A REVOLUTION IN INDIAN TAX SYSTEM!

A major reform after the Independence of India is happening from tommorrow, 01.07.17.

India is entering into a single tax regime.  Freedom from 17 taxes.

This must be a great relief for the corporates as well as traders who have been fed up with a total of 17 taxes by central and state governments.

In India,  in the past, you had to pay sales tax to the states, CST-Central Sales tax, Turnover tax, Entry tax, Production Tax, Service Tax, Octroi, Cess, etc, etc.

India has been a country of confusing tax system in the world.

This in fact has been making the foreign investors to hesitate to start a business in India.

It is not an easy task for the central government to make a consenses among all the states that are ruled by regional parties and opposition also.

Also read:  10 YEARS OLD CHILDREN DRIVING TWO WHEELERS IN INDIA!

In a country like India, such a major reform is definitely a breakthrough.

In the past, if you produce a product in Delhi and supply that product from Delhi to Chennai, you will pay Production tax in Delhi, Sales tax in Delhi and CST in Delhi. Then, you need to pay Octroi in its transportation to Chennai.  When the product comes to Chennai, it faces Entry tax (charged in some states), Sales tax, CST in Chennai.

In addition to these taxes, the transportation costs, margins for super stockists, distributers, dealers, retailers, etc.  If we add promotional costs also, a product that cost Rs.100 will become about Rs.200 when it comes to the tail end consumer. If we add the bribes throughout this process, it makes the cost still more.

How many forms! How many taxes!

Now, everything has been made single point tax.

Also read:  IMPOSING HINDI IN NON-HINDI SPEAKING STATES – A DANGEROUS MOVE!

When the manufacturer sends the gods from Delhi to Chennai, he pays tax in Delhi alone.  No taxes in Chennai. The Tamilnadu Government will get its share of tax from the GST.

To avoid different taxes in different states, the corporates had established Godowns in every state and supplied the goods from the godowns within the state.  In addition to that,  a single product was manufactured from different locations.

Now, they can manufacture from a single location and supply from a single place all over India. No need to pay octroy, entry taxes in every state. They can supply from Delhi to Chennai paying a single tax at a single point.

Even in the Unites States, the tax reforms are very difficult to implement as agreed by Donald Trumph himself.  He has lauded India for having successfully implemented GST in India, a country of 1.3 billion population with the diversified people and complicated governance by states.

The foundation for GST was laid about 10 years ago and after crossing all the barriers, it has become a reality now.  Mr Modi who opposed GST when he was a Chief Minister of Gujarat, later accepted it when he became the Prime minister of India.   He and his ministers carefully handled the reform and dealt with all the states diplomatically and got through the implementation. Modi Governments as well as the earlier Congress Government have to be lauded for this major reform.

TAX RATES

There are four categories of taxes: 5%, 12%, 18% and 28%.

This 28% if the highest in the world.  If the top slab is kept as 20-22%, it will be still appreciable.

Some good like rice, salt are exempted from tax.  In the services, no tax for educational services.

SOME GOODS & SERVICES THAT WILL COST MORE AFTER GST

Banking, insurance (brokerage) services – hence premium for life insurance policies  will cost more;

Paneeer;  Spices; Ghee, coffee, Chewing Gum Ice cream, Chocolate, Gold, IPL Cricket ticket, Shampoo, perfumes, A.C, Washing Machines, Television.

Consumer durables and electronics like Stoves ; lighting, fans, water heaters, air coolers, etc.

Medicines & Health care ;

School fees ;

Residential rent  ;

Travelling by train ;

Courier services ;

Mobile bills, handsets ; Laptops; desktops.

WIFI and DTH services ;

Cigarettes and tobacco products ; Liquor

Textile and branded jewellery

Beauty Parlour

Aerated drinks;

Also read:  SHOULD RAJINIKANTH COME TO POLITICS? A BALANCED REVIEW! 

SOME GOODS & SERVICES THAT WILL COST LESS AFTER GST

Peculiarly, the tooth paste will cost more, but, tooth powder will cost less.  Why it is so? On what basis?

Milk Powder curd, Buttermilk, unbranded natural honey.

Tea, wheat, rice, groundnut oil, Sunflower oil, Palm oil, Coconut oil, Mustard oil, Sugar, Jaggery, Noodles, fruits, vegetables, Pickles, Jam, Mineral water, cashew, baking powder, biscuits.

Bathing soap, hair oils, Washing powder, Tisssue papers, napkins, candles, kerosine, cooking gas, match boxes, incense sticks, etc.

Notebooks, pen, papers, school bag, printers.

Insulin X ray film medical diagnostic products medicines for diabetic and cancer.

Silk, shoes costing below Rs.500, garments costing below Rs.1000.

Movie tickets and theatrical performances;

Dining ;

Two-wheelers ;

Some cars ;  Tractors, Travelling by air.

Diesel engines with the capacity below 15 HP;  Transformers.

Paint ;

Cement ;  Bricks.

Furnitures;

Biscuits and cakes.

Hotel rents that are below Rs.7500;  Economy air tickets.

CHALLENGES BEFORE THE GOVERNMENT

GST, being a revolutionary new regime for India that has been used to complex multi tax systems, will face some challenges for a few months.

The companies should make their accounting systems ready to follow GST regime and train their employees.

The transactions during the transition period may face some difficulties.  Therefore, the government should allow to file the returns every three months ATLEAST FOR THE FIRST SIX MONTHS so that the business community can become accustomed with the accounting with the GST. However, we can expect that the GST will be allowed a smooth transition thanks to the training provided by various government agencies and private firms/ professionals, though it is insufficient.

The states may witness fall in their revenue for a few months, but, in the longer run, they will benefit more from GST.

Once established well, the businesses will find the new system easy to follow.

Though the prices of some products will raise, overall, we can expect fall in the prices because of the absence of multiple taxations.

This is the another Independence for India from a complex taxation system that was existing for the past 200 years.

NOW, ONE INDIA – ONE TAX.

Let us welcome this GST regime that has been brought after much efforts in a complex administrative set up of India.

Also read:  PRODUCT M.R.P PRICING FRAUDS IN INDIA! AN EXCLUSIVE REPORT BASED ON A SURVEY!