How GST can make a difference

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%.

All the information, opinions, and views depicted in this article are solely those of its original author/publisher/web source and doesn’t reflect or imitate the views, principles or objectives of Sage Software Solutions (P) Ltd.

Originally published at https://in.finance.yahoo.com/photos/budget-2016-how-gst-can-make-a-difference-slideshow/kim-k-bares-again-latest-photo-110015354.html

Finally!!! Welcoming a new chapter in Indian Economics, “the GST”

The Wednesday of 3rd Aug 1016, a day when Rajya Sabha finally took the big step in, by passing the GST bill in India, after a period long wait and arrays of debates and discussions over it. GST is the biggest transformation in tax reforms India has seen in years and has left everyone, from a common consumer to business entrepreneurs, curious over what changes it may bring upon.

So let us dig in further, beginning with how GST is different from VAT

GST and VAT:

VAT, abbreviated for Value Added Tax, is a tax that the State government levies upon the local sales, with the percent tax differing form state to state. Though VAT has been designed with a concern to minimalize the cascading effect, the business entrepreneurs still have piles of additional taxes and tax on taxes such as Central Sales tax, Excise, Octroi, etc.

Quick Points:

• Vat is eligible for the sales within the state

• Every state has its own compliances

• It is applicable for goods only.

Now with GST in action, the very first change it brings upon is the shift of base from state to central government, which means central government would be managing and collecting tax revenue henceforth. this not only centralizes taxation reforms but also provides a national market for business entrepreneurs to grow.

Quick Points:

• GST is a hassle-free replacement for VAT, CST, Service tax etc.
• Better control over inflation
• Reduction in consumer pricing
• Reduction in state government revenue
• Uniformity in national tax reforms

Thus, GST can probably show few good signs for consumers and a great time for SMBs to hit the national market. Having said that, let us have a look how GST can effect business in India

benefits of GST in India:

• Hassle free tax and compliances management

• Better SCM and Distribution in absence of any additional taxes like Octroi

• Reduced manufacturing production, better profit margin

• Availability of national market, with one single tax.

To conclude with, the effect of GST bill can only be seen in the years to come, depending upon co-operation from states, adaptability of businesses and skills of the working staff. Until then, it is just the best foot forwards, to provide the nation a leading leap in economic development.

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Disclaimer: All the views, opinions and information expressed in this blog are those of the author and its web source and in no way reflects the principles, views or objectives of Sage Software Solutions (P) Ltd

Unveiling the GST Tax Rates

GST or the Goods and Services Tax is one of the much awaited and biggest tax reforms in India in last 70 years. GST claims to unify all the taxes levied throughout the country in a bid to eradicate inflation and induce economic growth. On 3rd of November, 2016, the GST council decided to get rid of the “the rich get richer and poor get poorer” catchphrase in India, as it revealed its four tier tax rates, applicable from the month of April.

So, what does the council has for the country folks?

The tax system has been categorised into four range i.e. 5%, 12%, 18% and 28% (steeper to the pre-proposed 6%, 12%, 18% and 26%). Let us apprehend them for a better understanding:

The 5% slab: The GST council has been very keen on eradicating inflation. as it has cut out the taxes levied upon grain and food (which constitutes up to 50% of the consumer inflation basket). To add more to it, the 5% tax slab is levied upon the common use products, in comparison to the earlier 9%.

The 12% & 18% slab: The two standard rates that would be applicable upon bulk items such as processed products, oils, soaps, etc. will be further categorised in the upcoming session as which commodity falls in which slab.

The 28% slab: The council has been keen on uplifting the economic equality, as the top percentile slab will be applied upon luxury and white goods along with tobacco and aerated drinks. An addition cess will also be implied on these goods to compensate for the rollout losses.

Another rate slab is yet to be decided for gold and other precious metals, which is likely to be around 4% (as proposed earlier). (Source: Economic Times)

Though these slabs are yet to be approved by the Parliament, the GST council has put their best foot forward to get rid of the indirect taxations in an attempt to gain a steady control over the administration of the overall tax system. 

Restrainers:

• An amount of 50,000 crore would be needed to compensate for the loss that the states had to bear from GST rollout, for which a lapsable clean energy cess and additional cess will be levied for the initial five years, said the Finance Minister. (Source: TOI)

• The service tax shoots up to 18% from the previous 15%.

• It may take a considerable amount of time for the governments as well as the common people to acclimatize with the new system.

However, these restrainers are momentary and assure long-term benefits for both the common man and the government. And, the council is more likely to get into training and testing mode in preparation of the new taxation system, that could be the game changer for a developing nation like India. 

Disclaimer: All the views, opinions and information expressed in this blog are those of the author and its sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.

GST council sanctions last two draft bills, limits cess on demerit merchandise

In a subversive move, the Goods and Services tax (GST) council on Thursday approved the last two remaining draft bills for State Goods and Services tax (SGST) as well as Union Territory Goods and Services tax (UTGST) and restricted the cess on cigarettes (290%), aerated drinks (15%) and luxury automobiles (15%).

Sliding an inch closer to the July 1 rollout date, the council cleared the remaining two GST bills to implement the biggest tax reform of the country paving its way into the state and parliament legislative bodies. The council’s approval of these two bills is being deemed as a landmark development in the country’s exhaustive journey to implementing a unified tax system, according to experts.

The council also approved to limit cess on demerit (and luxury or sin) merchandise. The newly introduced cess rates are as follows:

• For automobiles and aerated drinks (colas), the cess has been limited at 15% meaning that the total tax on cars and sweetened beverages cannot go beyond 43% (28% cess + 15% cess).
• For cigarettes and other tobacco products, the cess can be either 290% or 4,170 INR per 1000 sticks or a combination of both.

Admittedly, these newly introduced cess rates are just qualifying provision, since the actual tax rates could be lower, and the decision rests solely on the GST council. 

Interestingly, the GST council has also decided to introduce a qualifying provision cess rates on all the automobiles and not just luxury automobiles. This infers that the council could decide to levy cess on non-luxury automobiles as well at a later date, which can be over and above the 28% tax rate.   

For goods produced in SEZ (special economic zones), the council has decided to levy tax rates that are similar for exports. Procurement of goods by SEZs would be zero-rated, whereas in the previous draft, SEZs were required to pay the tax first before claiming refund. 

“In the previous meetings, the GST council already cleared bills for state compensation (for revenue loss that would occur while transition to GST reform), Integrated GST (IGST) and central GST (CGST),” said Finance Minister Arun Jaitley, who heads the council.  

Four of the proposed bills excluding the state GST bill will be put forward for Union and Lok Sabha cabinet’s approval, whereas the state GST draft will need approval by state legislatures.  

Further, it is expected that the NDA government would table the proposed bills in the current budget session as revenue bills for smooth passage into the parliament house. 

The bills are expected to eradicate tax hurdles across states and include certain indirect taxes to be levied by the states and centre subsuming luxury tax, entry tax, entertainment tax, value added tax (VAT), service tax and excise duty. 

Next, the council has to validate nine sets of taxation rules along with wrapping up the tiring task of allotting various goods and services into different tax buckets. 

These rules along with the ones on input and valuation tax credit, invoice returns, refunds, payment, and registration will be decided in the next GST council meet on March 31. 

“We have set aside sufficient buffer time to decide the rates for different tax slabs to ensure that we meet the July 1 rollout deadline,” added Mr. Jaitley.  

Bottom Line:

Industry and tax experts opine that the government should quickly release all the approved GST tax rates and slabs along with accompanying schedules and rules in order for businesses to evaluate the final impact of GST tax reform and align critical business processes around it.

Disclaimer: All the views, opinions and information expressed in this blog are those of the author and the respective sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd. 

Source: Firstpost and Livemint

It’s a Go-ahead from Lok Sabha for GST

India moves an inch closer to the dream of a unified tax reform, as the Lok Sabha on Wednesday passed the much-awaited GST bill after an all day long debate in the Parliament. The four GST bills include CGST (Central Goods and Services Tax), Union Territory GST Bill, Compensation GST Bill and Integrated GST bill. The GST bills span across PAN-India except Jammu and Kashmir as of now.

The government is eyeing for the July 1 rollout date for the new tax reform to come into play. Arun Jaitley, Finance Minister stated, lack of diverse slabs in the taxation system would make the reform regressive, since all goods will not attract same tax rates.

He further added, “Some goods certainly are essential for the poor class. A pair of Flip-flops and a BMW cannot have same tax structure. What is the merchandise and who uses them, matters here. And, this is a revolutionary tax reform that is deemed to benefit people from all walks of life”.

Goods might turn ‘a bit cheaper’ once GST tax regime comes into place and all other taxes are bumped off thus, eradicating the cascading effect, said Mr. Jaitley.

The four-tier tax slabs are 5%, 12%, 18% and 28% as sanctioned by the GST council. The government has decided to set the maximum GST slab at 40%.

Talking about the tax slabs on petroleum products, Mr. Jaitley added that though the council has included petroleum products in the GST tax regime, as of now it will stay zero-rated. The council has decided to bring it on table within a year after the GST implementation.

The nature of financial activity today is undergoing rapid changes and the prime objective of GST tax reform is to promote ‘free flow of services and goods across the country with a unified tax reform’. The new tax system is expected to be efficient, difficult to violate and will have stringent compliances.

President, Pranab Mukherjee had earlier approved the GST bill in September 2016. The bill, which aims to reboot the country’s intricate taxation system by substituting 17 different tax types with a single and unified levy, was sanctioned by the Rajya Sabha in August 2016. Whereas, the Union Cabinet sanctioned the GST bills in March.

The real purpose is to safeguard the consumers from inflation after the GST implementation. However, industry experts and business owners across the country are requesting to postpone the targeted implementation date i.e. July 1 to allow them to brace adequately for the GST tax rollout.

Disclaimer: All the views, opinions and information expressed in this blog are those of the authors and their respective sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.

Source: SME Times and Pragativadi News

GST: What it means for the Common Man?

With the Rajya Sabha passing all the four GST bills in the parliament a week back, the nation’s biggest and revolutionary tax regime GST (Goods and Services Tax) is all set to become a reality soon. Boasted as the most subversive tax reform in the country after independence, GST is expected to curb transactional costs by introducing a unified tax system stirring economic growth in the long run.

With the prospects that GST would improve the GDP by a couple of percentages, the reform in its entirety might come with a mixed bag of surprises for the common man.

Talking about its long-term impact, GST should mark a positive impact on most sectors. Based on the GST implementation experience derived from other nations, India might experience an inflationary impact especially during the transition stage, which is expected to fade with the rollout of measures such as anti-profiteering.

Yes, with the inclusion of anti-profiteering along with other counteractive measures, GST should lead to reduced cost for most of the supplies to the end-users in the long-run.

Here’s a quick look at what the GST could mean for the common man:

Services that are likely to become expensive include:

• Mobile phone bills
• Premiums for life insurance plans
• Investment management and banking services
• Online ticket booking services
• Basic luxuries such as DTH services
  

Prices of the following essential services are also likely to go up:

• Healthcare
• Residential rentals
• School and educational fees
• Rail/metro commute
• Courier services

Services that might see a price drop in most of the states are as follows:

• As the GST council has decided to include entertainment taxes in GST, movie tickets might turn cheaper in most of the states across the country.
• Dining out in restaurants/hotels may turn pocket-friendly in several states.

Vehicles and certain essential goods to witness price drop:

Under the GST tax system and the current supply chain ecosystem, the following might get cheaper:

• Two wheelers
• Luxury and SUV or premium cars
• Entry level sedans excluding small cars

Minimal impact:

Basis of the current supply chain landscape and other associated indirect taxes, the common man can expect marginal impact on white goods such as:

• Stoves
• Washing machines
• Televisions
• Shampoos
• Toothpastes
• Soaps

Prices of sin goods and aerated drinks to go up:

The government with its determined outlook towards injurious/sin goods, proposed a high tax rates on ‘sin goods’ that include cigarettes, aerated drinks and tobacco products. With a higher tax rate of around 40%, these goods may witness steep rise in their prices.

Here’s the four-tier GST tax rates

Positive impact lurking around the corner, expected in long-term!

Whilst the afore-mentioned forecasts are based on the statements/data released by government officials and authorities, it would be good to wait for the final verdict on the fitment that the GST council and government will release for a wide range of supplies and services. Nevertheless, with the enablement of anti-profiteering and other counteractive measures, GST is expected to curb costs for most.

Disclaimer: All the opinions, views and information conveyed in this blog are those of the author and its sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.

Source:  The Economic Times