Is GST an ‘Extra’ Tax?

While GST will bring down prices, remove tax barriers, increase the revenue and ultimately lead to employment generation and prosperity, the confusion and mayhem in the country over increase in prices and compliances, trouble of SMEs are the things which will get settled only if the government takes appropriate steps.

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Is GST an ‘Extra’ Tax?
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As India marathons to the new ‘bundled’ tax regime, a question that comes up for consideration very often is why the political parties took so much time in arriving at a consensus to pave way for implementation of ‘Goods and Service Tax (GST)’. While the ruling party used to oppose the implementation while UPA was in power, terming the new tax regime to be draconian to the interests of traders and businesses, the haste in which the tax regime is being set to brought in, questions arise whether it is merely a change of opinion or a part of the bigger agenda to set the economy in a progressive path.

GST will incorporate under its umbrella a host of indirect taxes levied by the Centre as well as the sates except for a few state/local taxes. Though, it was pitted in the initial phases that GST will have only one rate of tax, however, considering the Indian Economy, the Centre has fixed tax rates in for slabs i.e. 5%, 12%, 18% and 28%.

Being touted as a ray of hope to portray a better, clean and transparent image of our system, it is expected that the new tax regime will integrate and promote the initiatives of the government to attract foreign investment and provide a platform to revive the economy.

While the implementation is not easy, as admitted by the Finance Minister, initial few months will be crucial but not impossible. The compliances one is required to follow under the new tax system will be much more than those being followed under current tax laws, but at the same time the idea of the Government is to ensure zero or minimal tax evasion by digitizing each and every transaction.

The mechanism proposed for taking Input Credit of goods/services and passing its benefit to the ultimate consumer seems to be an attractive sweet pill but whether such thinking will actually materialize into  practice, time will only tell.

In a major relief to the exporters, GST also removes the custom duties applicable on exports. The competition in foreign market is likely to increase on account of lower costs of transaction.

It is an expectation of the government that GST will bring down prices, remove tax barriers, increase the revenue and ultimately lead to generation of employment and prosperity of economy, whether such expectations transform into reality remains unanswered and will largely depend on the implementation schemes, incentives and initiatives of the government.

While with the transparency as is being promised post implementation of GST is likely to improve the overall image of India globally, the confusion and mayhem in the country over increase in prices, increase in compliances, a move to destroy to small traders / manufacturers and confusion in understanding of law is something which will get settled only if the government takes appropriate steps to properly promote and clarify on various aspects this new taxation system.

Sumit Batra is a practicing tax lawyer since 2007. Practising in the field of Indirect Taxes and appearing before tax forums all across India including various High Courts and Supreme Court of India. Has served as Private Expert – Service Tax Department, Delhi. He has been delivering lectures on service tax before various associations/federations.