Ad Here  
Star of the South Indian GST – Between extremes… Better relations with UK... A dual GST that will protect prosperous states Healthy finances of the Chennai Corporation Research for survival... Deming awardees galore! 1800 parties registered with EC – Less than 60 contest elections An eventful week with VVIPs of Delhi TN - so much to offer... What the big B should offer? CSR, tech revolution and bank crisis Wanted: decentralised financial system Welcome move to widen the tax net… It’s raining funds for states. Really? Need plan over the long term planning Babes In the wood-RBI North block has little clue to curb inflation Tax evaders’ get out of Jail-Free Card A blueprint for the future Focus on agriculture and human resources Sowing seeds of hope In the horns of a dilemma When the examiner cheated... A gratifying record Welcome rains for damaged roads... Much ado about nothing Reform this licence to…kill How will it PAN OUT Welcome Measures. Work for 10X Change Why (not) abolish? Well-administered State Trail-blazing Tamil Nadu Kudos to GIM organisers... Sustainably developing manufacturing sector… Technology and economic development should be linked An eco-friendly commute in Mysuru Economy through the month Need for radical RBI reform A historic indirect tax reform MS Installed Chennai Airport-Ready for a rapid take off... South India’s 100 most valuable companies You too T M Krishna? Tryst with GST Truce at Kasturi Buildings The Great Fall Jobs - Lost, Changed or Gained CAD and the emergency thereof Breaking news or breaking credibility? Make way for Make in India... BJP can now hasten its thrust for reforms Why throw baby with bath water? Rail-road Rajaraman Two welcome measures from the chief minister... Weaving wealth of western Tamil Nadu Strategic planning the missing link The deluge and the several kindly souls They add lustre to Padma Awards Sardar Sarovar – the seventy year itch Babes In the wood-RBI North block has little clue to curb inflation Land, land everywhere, but... Industry can’t get it from Mars, yet Policy Makers INDIA keeps its date with destiny Ganesh’s mantras A Fine division of responsibilities Focus on southern TN... Outward ho Skewed Economic Zones? Miles to go... If not Tamil Nadu, where else? Pool energy prices Much can be done by us Public investments and welfare will surge Little surplus after salaries, subsidies and debt servicing Low profile moves Cleansing Indian retail PC please be our Santa A tale of two Bihar babus No groundnuts in groundnut oil! After all, customer is the king Oh my GOLD
INDIA keeps its date with destiny
When the history of modern India is written, three events will stand out. The first of course is the 15th of August 1947; the day India awoke to life and freedom. The second happened in 1991 when India dusted the cobwebs of socialism to marry market economy. But the biggest breaking news of the 21st century, its most defining moment, is the GST, which when handled well, can dramatically alter the landscape of India’s taxation.

Across the spectrum, the new legislation found a warm welcome. Captains of industry, opinion makers, lawyers, and chartered accountants gave their thumbs up.  There were, of course, other well-meaning voices, not voices of dissent, but voices of caution that suggested that many things needed ironing before GST can be rolled.



The GST Act kills a number of other taxes: at the least five at the Central level and five at the state level. 

At the Centre, the key taxes are the Central Value Added Tax (CENVAT or Excise Duty), the Service Tax, the Central Sales Tax (CST), the Countervailing Duties (CVD) and the Special Additional Duty of Customs (SAD). 

There are a few state taxes also that will become museum pieces.  The most significant taxes include the state Value Added Tax (VAT), the sales tax (in some states), the entry tax, the luxury tax and the entertainment tax.

But hold on. This does not mean that we are going to become a tax haven. Taxes will not disappear overnight. They will come with a different name: Goods and Services Tax, aka GST. On a transaction, both the centre and the state will levy a tax. The centre’s levy is called Central GST. The state’s tax is called State GST. In the case of interstate sale the tax is called Integrated GST and will be collected by the Centre. 

So what is the big deal in it? 



There are at least three compelling reasons to have GST. 

One, it is psychologically far more appealing to pay one tax instead of ten taxes even if the rate of the one tax is higher than the cumulative rate on the ten taxes. With many taxes, you get the feeling of being taxed ad infinite.

Two, today an identical product is taxed at different rates in different states. This is a tad sad. GST shifts this and ensures that the tax on a single product is the same across the length and breadth of India. While the jury is out on whether this is the best way for making states competitive, this gives the feeling of oneness in the country as an identical product gets taxed at an equal rate, across India, leading to the chorus ‘one nation, one tax.’ 

And three, like internationally, GST will shift the collection of tax from the producing state to the consuming state.  Suppose, a laptop is produced in UP and sold in Maharashtra. Earlier, the excise duty went to UP and the sales tax to Maharashtra. Now, the entire GST will go to Maharashtra.  The producing state will get nothing. 

This is good for developing states who consume more than what they produce. In India, these consuming states have been historically backward. The view is that by shifting the collection points, these states will gain and could use that money for development. All economists are not agreed on this point. Their argument is that the best countries of the world are producing countries and a shift to rewarding consuming states with more cash, could make them consume rather than produce. There is a point there. 



What makes the GST a revolution?  At the heart of the game-changing GST legislation is technology. This is how the platform works. 

When a seller company sells or renders services, it will have to uploads its transaction on the GSTN, and will have to give a laundry list of details about the buyer like his name, GSTN number, PAN, UID Number, quantity sold, the price at which sold, and the GST collected. Immediately, the GSTN will automatically populate the purchase register of the buyer. In a GST audit, armed with this information, the audit team could question the buying company as to how it disposed of its purchase.  

The portal will be accessible to the government, which will track down every transaction while the taxpayers will file their returns and taxes and maintain the details.  Mark it, close to 3.4 billion invoices will be uploaded every month. Yes, the government will be sitting on a pile of information.

The registered reseller can claim full credit for taxes paid on earlier stages, as long as it is for further sale or manufacturing of goods or provision of service. These GST tax credits can be used to pay the GST liability on further supply. 

If a vendor fails to upload his sales, it would be at the cost of the buyer losing the tax credit and hence, the customer will stop buying from a vendor who does not declare his sales. In a nutshell, the system drives the tax evader out of business, as no one will be willing to do business with him. The act of policing is now handed over to the citizens of India. 

Thus, GST strikes at the root of where black money gets generated. 

1 2
Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236