Manufacturers, consumers set to benefit — if IT upgrades handle changes
The Indian government is confident that the country’s ambitious goods and services tax will be rolled out as planned on July 1, Revenue Secretary Hasmukh Adhia has said.
Designed to replace more than a dozen confusing levies imposed by India’s central and state governments with a uniform nationwide sales tax, the GST is expected to reduce prices for consumers, boost domestic manufacturing, make exports more competitive and generally help do business.
The tax regime “has been in the making since 2006, and finally we are ready to implement it,” Adhia said at a meeting on the GST here. The government’s “information technology system is ready, the law is ready and the rules are ready, too.”
The GST will unify India into a common market. But issues such as upgrading IT systems and modifying accounting practices among corporations and merchants nationwide have led some to urge New Delhi to postpone the rollout to September.
“We are making a full effort to implement it from July 1,” Adhia stressed Tuesday.
The goods and services tax is levied on commodities and services, as opposed to a direct tax on income or wealth. “It is called an indirect tax because a consumer does not pay it directly, but through traders,” Adhia explained.
Current taxes to be subsumed into the GST include the central government’s excise duty and service tax, as well as the purchase and value-added taxes from state governments. Revenue is to be shared equally between New Delhi and the states.
The new system also will end cascading, or so-called tax on tax, Adhia said. An example of this practice occurs when the central government levies an excise duty on the manufacturing cost of a product first, and then the state imposes a value-added tax during the sale. A production cost of 100 rupees attracts a 12.5% excise duty. But then a 14.5% VAT is imposed not on 100 rupees but on 112.5 rupees, leading to tax on tax.
Additionally, when goods produced in one state are sold in another, the consuming state charges an entry tax of 2% to protect its local industry. Interstate trade also draws another levy of 2%, called central sales tax. The GST will abolish the entry tax and central sales tax, which should reduce prices for consumers.
By: Asian review/ April 27, 2017