The Goods and Services Tax bill (GST) was passed on August 3, 2016; the amended bill was passed on August 8, 2016. The new tax was originally introduced in December of 2014, with the purpose being to consolidate current indirect taxes as well as to improve tax compliances. The new tax will also assist in avoiding credit accumulation across the nation, which is a major concern for many nations today, with Japan having the highest debt-to-GDP ratio in 2016.
The largest hurdle in getting this bill signed into legislation was the fear of loss of revenue. Fortunately, the Central Government (Centre) and the State have finally come to an agreement and passed the bill in order to increase financial growth in India. The GST promises to increase revenue but also to increase the transparency and neutrality of the Indian government system.
As with any new law that is passed, there is a balance of pros and cons associated with the establishment of GST in India. First of all, the new bill will create a healthier business environment by reducing the taxes paid by manufacturers; as a result, this will create a better consumer environment.
A similar tax rate across the nation will also strengthen trade, as there will no longer be a difference in tax rates from state to state, so trade between states will be encouraged with minimal loss on either side. A single tax rate also creates simplicity for consumers, as the tax rate will no longer change depending on the state of purchase as it was prior to the bill being passed.
Of course, while there are pros to this new bill, there are also cons. The introduction of a single tax rate across the nation will create a more dominant central government, as the Centre will be the controlling body when deciding on the new tax rate to be shared amongst all states.
This can also cause problems for states that are product dependent rather than service dependent; they may not have enough service revenue to compensate for the loss of tax revenue, making the new tax system a poor choice for the product dependent states involved.
The introduction of new laws can often cause feathers to be ruffled, and this law is sure to be no exception. Some states will be impressed with the amount of increased financial growth experienced due to the passing of this bill, while other states are sure to suffer from a significant loss of revenue due to the lower taxes.
Unfortunately, nothing in this world is perfect, nor is it possible to please everyone involved with a new process (especially when multiple states across a nation are involved!) Regardless of how individual the states may feel regarding the passage of GST, the new bill is sure to move India forward as a nation and to create a bright and prosperous future for the country as a whole.
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