Editorial Oct 2017 Vol 20 No.20
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“Yad duram yad duradham, yad cha durai, vayvasthitham, tat sarvam tapasa sadhyam tapohidurthikramam”; means even if something is very difficult to be achieved, one can obtain it with penance and hard work. - Indian Philosopher & Economist Hon. Chanakya
“The hardest thing in the world to understand is the Income Tax.” - Albert Einstein.
“GST is Good and simple tax, transparent & fair system, prevents black money & corruption promotes new governance culture with co-operative fedaralism."- Hon. Narendra Modiji
“The old Indian was economically fragmented. New India will create one tax, one market, one Nation. It will be in India where Centre and States work together towards the common goal of shared prosperity."- Hon. Arun Jaitleyji
"The Ideal GST as a tax system would be below 12%"- Acme Intellects
Dear Hon. Narendra Modiji & Hon. Arun Jaitleyji,
After the Demonitization, GST. Then what next?
GST- The Daring step towards reforms in the largest economy of the world. The high risk will be taken by only people who are confident about their vision; in fulfilling their ideal dreams; they dare to sacrifice their lives for the cause of others.
As a responsible electorate of India, in the view of future of India, on behalf of our Advisory board, Editorial Board, Readers and Scholars unfeigned applaud your preeminence for your Sisyphean efforts of conscientious implementation of GST to make one tax and one country by facing huge challenges. Indeed! It is too late in India of GST implementation which is inevitable. Almost 140 countries at global level already implemented the GST including Australia, Canada, Germany, Japan and Pakistan. According to IMF report, India is likely to regain the tag of the fastest emerging economies of the world by 2018, with China projected to grow at 6.5% in 2018.
GST- Goods and Service Tax System is Simplified and cost saving system as procedural cost reduces due to uniform accounting for all types of taxes. Only three accounts; CGST, SGST, IGST have to be maintained. GST is structured to simplify the current indirect system. It is a long term strategy leading to a higher output, more employment opportunities, and economic boom. It will also help to build a transparent and corruption-free tax administration. Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold. It can bring more transparency and better compliance. Number of departments will reduce which in turn may lead to less corruption. GST will lead a more transparent and neutral manner to raise revenue.
By implementation of the GST it is possible to bring One Law One country, Single Revenue Neutral Rate (RNR). Transparency in the business, Ease of doing business, registration of startups, removal of cascading effects of taxes, simple taxation system, elimination of check posts, reduction of corruption, savings in logistics cost and time, sharing of the tax revenues to centre and state, reduction in tax evasion, distribution of revenues to poor states etc.,
Impact of GST implementation:
· One Law One Country: Government was attempting to fix a single Revenue Neutral Rate (RNR) on the goods and services so that the total tax revenue of the State and the Central Government remain the same. However, due to practical considerations and keeping in view the social conditions of India, four GST slabs have been set at 5%, 12%, 18% and 28% for different items or services. There is also a special rate for precious metals. The rate of 18% would however be applicable for most of goods.
Acme opinion: Initially the GST may face teething problem which would be eased out gradually. The Government may collect more revenue by to plug the revenue gap which is the need of the hour; where as 18% and 28% are found to be heavier for the upcoming economy like ours. Such a heavy tax not implemented anywhere in the world.
- Lower Business Costs & Unified Market: The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across states and reduce the transaction costs of businesses. The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for consumers. Companies which are under unorganized sector will come under tax regime. More business entities will come under the tax system thus widening the tax base. This may lead to better and more tax revenue collections.
Acme opinion: The GST is good, but the prices are not reduced, hence the cause for the same should be addressed.
· Unified Compliance Procedure: Under the previous regime, businesses were required to file different return for different taxes which were applicable on different business activities. If a business is engaged in manufacturing as well as trading of goods, then such business was required to file separate return for excise and VAT. However, under the new tax regime all these indirect taxes have been subsumed by GST and thus single return will serve the purpose for all business activities.
Acme opinion: This unified compliance become hassle free.
· Price Drop: The GST structure reduces cascading of taxes and also provides tax credits for inputs. Hence manufacturing units could get inputs cheaper and this would inevitably reduce inflation. Consumers would find goods cheaper than it was before. Businessmen would realize the benefits of GST and profit they get would increase. They are expected to pass on the benefits to the consumers. Anti-profiteering clause in GST would likely to ensure this. GST is beneficial for both economy and corporations. The reduced tax burden on companies will reduce production cost making exporters more competitive. GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.
Acme opinion: The tax slabs of GST are to be reengineered keeping the highest rate at 12% to bring down the rising price.
· Reduced tax evasion: the difference between present system and GST is that the present system gave an incentive to evade taxes (because excise duty was a cost for traders, thereby making it attractive for them to purchase without invoice). With GST, this incentive will vanish. Therefore, tax evasion will fall.
Acme opinion: The GST will reduce the tax evasion because of it’s structural impact.
· Tax bias for location will go - many businesses create depots and godowns in different states simply because there is a difference in tax rates. Now that GST will come, this difference between states will vanish. It would help to remove the tax difference as a bias, thereby helping businesses.
Acme opinion: The GST has done away the difference in tax rates of different states.
· Attracts FDI: Increase in Foreign Direct Investment: Tax expenses and compliance hurdles have been one among the top reasons why global companies hesitate to invest in India. After the implementation of GST 2017, it is quite well known that double taxation will be eliminated and the hefty compliance requirement of different indirect taxes previously will be merged into one, resulting in simpler and easier tax compliance. a simple tax system is very welcoming for all foreign investors looking to set up factories in India.
Acme opinion: The GST is more transparent, hassle free and therefore it may attract FDI.
Losses for States: As many state taxes under VAT are subsumed in GST and also states get only a share of revenue from GST in the form of SGST and GST being a destination based tax, the states are likely to incur losses especially manufacturing states like Maharashtra, Tamil Nadu, Gujarat, Karnataka,Haryana,etc. For this the centre has promised to compensate for 5 years.
Acme opinion: The resulted losses of revenue to States due to GST are purely temporary.
Faster Movement of Goods: Previously goods carrier were required to pay entry tax every time goods were transported into a different state. This was a manual process and because of this reason many times these carriers and trucks had to wait at state borders for clearance purpose. However under the new regime these processes have been automated and entry tax has been abolished. Essentially goods will move faster.
Acme opinion: GST being single tax model enables the easy and faster movement of goods between states without any intermediate tax hurdles and check posts.
Clean governance: Since everything is now through technology, people need not go for various officials to file returns and is expected to eliminate corruption.
Acme opinion: The GST is technology embedded and therefore it will eliminate corruption, black money and laborious manual work.
More money to poor states: Present taxation system was origin based, so tax collection used to go to manufacturing heavy states (Tamil Nadu, Gujarat etc.) Now, the tax collection of poor states (Bihar, Madhya Pradesh etc) will also rise. This gives an opportunity for all the poor states to develop.
Acme opinion: The GST generates more revenue and therefore more amounts would be shared with the states which would fulfill the cherished goal of oneness at the national level.
After thorough study and analysis of GST regime, it can be conclude that it helps the economy to boom and make the common man to smile due to all-round prosperity. It is indeed necessary on the part of the Government to create awareness about the GST tax regime highlighting its simplicity and benefits in the long run.
With warm regards,
Prof. Earanna. S,
Associate Professor, B.R.B.College of Commerce, Raichur, Karnataka State, India.
Prof. Sekhara Gowd Mitta,
Founder & Managing Editor, AIIJRMSST, Tumkur, Karnataka State, India.
& Assistant Professor, Dept of MBA (PGDMS), Kalpataru Institute of Technology, Tiptur, Karnataka State, India. & Acme Intellects Group
Acme Intellects International Journal of Research in Management, Social Sciences & Technology,
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