Optimism could be in the air for the GST legislation. Its implementation would amalgamate several central and state taxes. Discrimination between goods and services will be eliminated which will lead to simpler Invoicing procedures. Adding to this is the exclusion of cascading effects that will improve the competitiveness in the market. However, the flipside holds some perplexities as well. One is the delay in implementations due to the opposition of some political parties. Another can be named as the increase in the working capital requirements for companies. Where will this duality take us? We can say for now, the positives have the upper hand. Let's see how -
As an article in Economic Times stated, the government is considering a two-rate structure to minimize the impact of higher rates on consumers. The government, who is striving for 'Achhe Din' in India, has felt that a steep rise in service tax will be unfair when the GST is rolled out. By considering the same, it has decided to come up with a two-rate structure. This structure will give a room to tax key services at a lower rate. This will in turn grant relief to consumers who were loaded by the increase to 14% from 12.36%. There will be a standard rate and a threshold rate for selected services.
And there's more to this. A panel headed by chief economic advisor Arvind Subramanian is aiming for a revenue-neutral tax rates (RNR) under the GST. In simple terms, RNR helps the government to receive the same amount of money despite changes in tax laws. Two sides can be explained here for consumers and government. If the GST rate is above the RNR it can be a burden on consumers. This is because goods and services will be costlier than before. On the other hand, if the GST is below RNR then it will affect the economical development. This will be seen as the centre and the states losing revenues.
Thus, the government is trying to maximize the benefits for all sides. The panel is looking for a RNR that will be consistent with the present level of revenue collection of the Centre and states.
The government is looking to get the GST legislation passed in time. A short session is reportedly to be called to pass the bill. If this goes according to plan, India can experience a plethora of opportunities. Competitiveness will be improved. Companies across various sectors will be benefitted. Troublesome tax procedures will be eliminated and timely payments will be encouraged. This will breathe life into the Indian economy. On the whole, we believe the GST bill will help accelerate the economic growth.