Goods and Services Tax (GST), one of the most radical tax reforms in the history of Indian economy, has been effective from 1 July 2017.
Goods and Services Tax (GST), one of the most radical tax reforms
Goods and Service Tax (GST) is one of the most significant tax reforms introduced in the history of the Indian fiscal evolution. With a singular impact on the economic growth of the country and the way business is done in India, it is expected to achieve the following:
Dual GST structure
The central and state governments will levy GST simultaneously, on a common taxable value, on the supply of goods and services.
IGST - an Indian innovation
However, in the case of imports and inter- State supplies, an Integrated IGST (GST) shall be levied by the central government, proceeds of which will be shared by the central and the recipient state government. IGST is an Indian innovation which would help tax move along with goods/services, across states and therefore reduce refund situations at state borders.
Destination based tax
GST, is expected to bring a significant shift from origin-based taxation to a destination-based tax structure. This is likely to impact not only the operating business models but also the revenues of the centre/states. It has the potential to impact cash flow, pricing, working capital, supply chain and IT systems and hence provides an opportunity to transform your business.
Goods and services will be taxed by both the governments
Unlike today when services are taxed by the central government, sale of goods is taxed by the states while the manufacturer is taxed only by the central government, GST will allow equal opportunity to the centre and the state to tax all supplies of goods and services. In this respect, it establishes the truly federal character of Indian fiscal system.