iNM Volume 8 | Page 11

INM MAGAZINE VOLUME 8 | FEBRUARY 2016 #Finance GST: A FISCAL PANACEA Reet Khanuja MBA 2015-2017 KIIT School of Management T he biggest indirect tax reform in the country since independence is expected to be made applicable from April, 2016. For the future managers of our country, taking a business decision means considering all the financial constraints that can impact the decision making. In the Indian context, managers have to keep taxation as an integral part in their decision making. “GST has a very vital role to play which will facilitate better tax administration. It will bring revolution in the economic system. GST is expected to be the biggest reform after the liberalization, privatization and globalization policy of 1991 which opened doors to new opportunities.” goods and services. It can only be possible, if there is political will for the same by the Indian authorities. GST is the need of the hour and solution to the cascading effect of indirect taxes. With GST coming into effect, it is also expected to augment the GDP of the country by 2%. The establishment of any industry in India is very difficult today due to various kinds of taxes and duties being levied, and most of the taxes are not available in credit. GST will bring in a seamless input tax credit chain, which will lead to reduced cost of goods and services. As credit chain will function only if the transactions are recorded, GST environment will lead to improved disclosure of economic transactions, which may have positive impact on the direct It is difficult to design a perfect tax system that is universally applicable. An adaptation to the changing times is important to sustain in the current dynamic environment. VAT being a regressive tax, is strongly needed to be replaced by GST model in India. GST has a very vital role to play which will facilitate better tax administration. It will bring revolution in the economic system. GST is expected to be the biggest reform after the liberalization, privatization and globalization policy of 1991 which opened doors to new opportunities. Similar expectation has been made with respect to GST by many Indian economist and Indian Inc. There is a huge debate whether Goods and Service Tax (GST) should be implemented or not, and if implemented, then what would be its model or structure of taxation. Today more than 150 countries around the globe follow GST tax structure. Australia and China levy a National GST with a provision of sharing the collection among the states. Some countries follow State GST model where state has the authority to levy GST and decide the rates. But the model which is proposed to be adopted by India is Dual GST, which is currently being followed by Brazil and Canada. In dual GST model, both center and state will levy taxes on tax collections also. GST implementation will also lead to an increase in exports, as goods will become cheaper. It will also result in increase in revenue of the Government, because tax evasion will be reduced due to lower and uniform tax rate. “GST is arguably the most radical piece of tax reform which could become the basis of new cooperative partnership between center and state.” GST will address various issues like cost of compliance, low logistics efficiency due to multiple check points and barriers, different interpretations of the same term due to different legislation etc. 6