India is slowly dealing with its largest tax reform till date. The goods and services tax (GST) successfully rolled on 1st of this month, after dealing with the new laws for a week few of the several industrials were quoting that upcoming years may not be easy for other sectors to accept the changes in the tax regime.
The biggest implication of introducing GST is to ensure that all businessman doesn’t make undue profits by having all the tax benefits within themselves instead of giving them to the concerned customers.
Considering the rates of goods and products before and after the scheduled rollout on july 1st, Moody’s report indicated that implementation of GST in a expansive country like India is probably going to delay the intended benefits of the new implemented tax changes.
The new tax reforms are basically grouped into 4 sectors of 5 per cent, 12 per cent, 18 per cent and 28 per cent. According to some economists, this equivocal division may create a confusion in some cases. For an instance: The devices running on renewable energy is placed in 5% tax division, but the materials used in production of solar cells and its components are placed in 18% tax division. To address these confusions, a reformed version of GST will be rolled after the initial rollout. But changes in current system of tax payers will take time to adapt to the changes, GST council suspected.
According to the experts under the implications of GST, small manufacturing sector businessman will suffer the most. The businessman having a yearly turnover more than of Rs 20 Lakh also have to pay the excise duty which was under existing laws is 1.50 crore onwards.
GST bill enforces all the business to register in every state they are operating in, which would further lead to increase in compliances cost.
Also of many small SMEs those who are operating through a online marketing sites and have no tangible place of operations are also required to register with all the states that they are operating in. GST bill is expected to smooth the ongoing business and make it easier for taxpayers to manage their altogether.
Implication of new GST bills will be cause a stirrup in most of the corporate operations. It will force the companies to abandon their old practices and made them to reorganise their operations. It will be very hard for vendors to evade tax because every transaction will require an invoice which will be audited.
Analysts have also have suggested that with implementation of such GST rates on the floor, the rate of inflation will be very low especially on goods like essential services, household items, food items etc.
Also convenience of peoples few services like education, health, education, transportation and few other miscellaneous sectors are not included in the upcoming GST bill.
Economists and expects are in still in doubt about the positive implication of the GST bill. They have some valid uncertainties about the immediate impact of GST and its effectiveness in short period of time.
According to them, as of now GST implementation will be cause a major redesign of management in supply chain sector.
Moody’s is saying that effects GST bill will bore results in long run. As of short run the larger companies are likely to reorganise their business structure and small companies have to shell out more tax money irrespective of their convenience. This is also likely to worsen the development of the country’s GDP which is at record low after the demonetization act.