The Modi government has taken up different initiatives such as Make in India, Digital India, Smart Cities and Startup India. Such initiatives could possibly boost business growth in India. The proposed Goods and Services Tax (GST) is currently held up in the Parliament. Once the GST bill is passed in the parliament, it is expected to eliminate the cascading tax effect and free flow of goods within the country.
Here’s how GST can make a difference to the economy:
Global market:
India plays an important role in the global market. The proposed indirect tax reform could possibly stimulate the economic growth. The introduction of GST is highly expected not only in India, but also in developed economies. This may enable a better application of ambitious strategies for business and trade.
Central Value Added Tax:
Finance Minister Arun Jaitley’s announcement with respect to indirect taxes in the upcoming budget will indicate various measures to bridge the gap between the current indirect tax system and the GST. The government also needs to trim down the Central Value Added Tax and reintroduce a system to avoid the load of tax generally burdened by businesses at the time of final consumption.
Central Sales Tax (CST):
The Central Sales Tax is generally levied on sales or purchase of goods and services in the course of inter-state trade. According to the department of revenue, ministry of finance, Government of India, reduction of CST rate first from 4% to 3% and then from 3% to 2% has been done as a precursor to the introduction of the goods and services tax, as CST would be inconsistent with the concept and design of GST.
Service Tax and Central Excise:
The government needs to put in place a system that can align service tax and central excise in order to meet the anticipated threshold of central indirect taxes. It is also expected to reduce central excise. This move may further simplify the nation’s tax structure.
India’s GDP:
The implementation of GST has the potential to raise the country’s GDP. In the recent past, Arun Jaitley estimated that GST may likely increase India’s GDP by 2%.
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