Indian industry has been hankering for it for ages. Some recommend it; others criticize for making services ‘expensive’. Love it or hate it, the GST is here to stay.
For those who might not know, here’s what it is. GST or Goods and Service Tax is the uniform tax rate Indians will be asked to pay for any goods or services they purchase (except tobacco, alcohol and petrol).
The upside is whether you buy a t-shirt or dine at a restaurant, you’re paying the same tax rate. This increases transparency. The downside it that consumers may have to pay a bit more for the same services.
A key committee set up by the government has suggested a GST rate of 17-18%. So what does it mean for the common man and how will things change?
“The lower the rate, the better it is for the common man. The cost of goods is going down. Services might cost marginally higher, but a lot would be compensated for with the reduction in cascading. This would receive a positive response from the common man who paid close to 28% as indirect tax”, Bipin Sapra, Tax Partner, Ernest n Young said.
The catch is that GST has to pass both Houses of the Parliament before the Bill turns into legislation. It also has to get approval from the GST Council that will include Finance Ministers of States, top bureaucrats from the Centre and the Finance Minister himself.
Judging the fact that the Congress was gunning for anything below 18%, and State Finance Ministers would see this as a measure that’ll ensure their states won’t be affected despite the cascading effect, the bill is largely expected to pass the Council with clear majority. Experts have their fingers crossed.
“I hope this recommendation would expedite the process of introduction of GST in India. The ruling and opposition parties can come to an agreement based on the recommendation”, Sachin Menon, Partner and Head, Indirect Tax and COO, Tax & Regulatory Services at KPMG India said.
Last but not the least, while the government is trying to stay true to its April 2016 deadline, the industry is expected to ask for some more time to implement the same as the GST would call for an overhaul in accounting structures.
To not get ahead of ourselves, the next big question is if the Houses of Parliament agree to the recommended rates.