After a long wait of 10 years, the goods and services tax (GST) is now a reality. Most of the work required for implementation of GST from July 1 has been completed. Trade and industry outreach programmes are in full swing. It is time now to reflect on the possible benefits of this new tax regime to trade and industry, to consumers, to the government and to the entire economy
The prime benefit of GST is that India will become a common market. One product or service will have a single tax rate in any part of the country. The multiplicity of taxes on the same commodity or service will now go.
No more taxes that are barriers to industry such as octroi or entry tax. This obviously means that trade and industry will have a much lesser compliance burden compared with the current regime in which they have to file different returns with different authorities for different taxes. The consumers also would better understand the total incidence of tax on the product or the service they are buying.
The total incidence of taxation on a product or service is likely to come down for most items. This will happen because of the removal of cascading of taxation, and availability of seamless flow of credit across the value chain. If goods are produced in which services are used, the input tax credit of taxes paid on services will be available and vice versa.
Also, there is a provision in the GST law that, by chance, if taxes paid on the inputs are more than the tax rate of the output liability, refunds will also be given except in certain items such as work contracts. Such a scientific system of taxation removes all hidden taxes and brings down the overall burden of taxes. This will benefit consumers immensely.