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.
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