Expectations were high as Finance Minister Arun Jaitley was likely to chart out a roadmap for the implementation of the much-needed Goods and Services Tax (GST), a major reform that aims to ease procedures related to multiple layers of taxation that benefits MSMEs. However, Jaitley made it clear that the bill will be cleared by the end of this year. A study by the National Council of Applied Economic Research (NCAER) reveals that implementation of GST could lift India’s GDP growth by 0.9% -1.7%.
The GST aims to replace all indirect taxes that are levied in India. This would be a critical step in favour of MSMEs as it intends to eliminate the current central excise duty, service tax as well as additional custom duties at the Centre. At the state level, GST will put an end to the present Value Added Tax (VAT).
Considering the fact that 140 countries are using GST in some form or the other, India will adhere to a standard world policy with this roll-out.
How will MSMEs benefit from GST?
Currently, MSMEs pay indirect taxes as the procurers of goods/services, and file returns as sellers. Execution of GST will put an end to complex taxation practices thus saving time, reducing transaction costs and making the system tax-payer friendly for MSMEs.
GST will help bring transparency in the tax collection system and evading taxes would be tougher
Effective implementation of GST will create a business-friendly environment for MSMEs and make them more cost-effective and competitive in the days to come
Current status of GST
Lack of consensus between the states and the Centre on details of GST has been the primary reason for the delay in GST’s execution in India. The main cause of differences was compensation to states for reduction in income from Central Sales Tax (CST)
States want petroleum to be kept out of GST’s realm. The UPA government advocated inclusion of petroleum in GST
States want Centre to give assurance on compensation for loss due to GST
Expressing government's commitment to push growth, Arun Jaitley revealed the Centre and States need to work together harmoniously to roll out GST. Watch this space for more updates on GST!