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Effects and Implications of GST bill

Published on Tuesday, March 28, 2017

“GST has been positioned as a comprehensive indirect tax on the sale, manufacture, and consumption of different kinds of goods and services throughout India and thus the GST will have far-reaching implications through uniformity in the tax rates across various States and Union Territories.”


Implementation of the GST bill is round the corner – although the word “GST” has been repeatedly been used for the last more than 11 years. The rollout of the Goods and Services Tax (GST) is now more or less certain from July 01, 2017 as proposed by the Union Finance Ministry. With the rollout of the GST, a whole lot of duties will be replaced, by the GST. The four Bills that would operationalize the rolling out of the GST were tabled in the Lok Sabha on March 27, 2017. These four bills are: a) Central Goods and Service Tax Bill 2017; b) Integrated Goods and Services Tax Bill 2017; c) Union Territory Goods and Services Tax Bill 2017; and d) Goods and Services Tax Bill (Compensation to States) 2017. These four bills would be taken up on Wednesday, the 29th March, 2017 for consideration and passing.

Passing of the GST: .

Since the GST is a ‘Money Bill’, its status as a 'money bill limits the intervention of Rajya Sabha. The decision of passing of the GST Bill is solely in the hands of the Lok Sabha. Rajya Sabha may make some 'suggestions' if it so desires; which may or may not be implemented by the Union Government. In case the Rajya Sabha does not revert back the bill since its placement in the Rajya Sabha, it will be assumed as having been passed by it.

Effects of the GST: 

The foremost effect of GST is that it is expected to bring uniformity and simplicity in the tax regime. Once GST is implemented it is going to make things more efficient. GST will lead to increased tax compliance. GST will boost growth rate and curb corruption as well as curbing black money generation. Once implemented, GST, billed as India's most ambitious reforms move, will stitch together a common national market, dismantle fiscal barriers among states and consolidate a patchwork of various state and central duties such as VAT and Excise into a single tax.

Importance of the GST:

The introduction of the GST would mark a watershed moment in the tax reform landscape of the country. The GST has so far been hailed as a singular decisive reform which will remove inter-state tax barriers and rid the economy of the burden of cascading tax, integrating national trade and altering prices of goods and services favorably.

Pre-Implementation Implications of the GST: 

The implications immediately to be faced by the GST Council – headed by the Union Finance Minister Mr. Arun Jaitley is going to be the fitment of thousands of commodities and services into the five GST rate slabs (0% i.e. fully exempt slab, 5%, 12%, 18% and 28%). This fitment could prove to be among the trickiest jobs for the Council to handle. The rate fitment process is going to be more susceptible to lobbying not just from different sections of industry, but also from various State Governments that would like a favourable tax treatment for them. GST Council is going to have many sittings during the month of April 2017 for this very purpose. The rate fitment process is certainly to have implications for the various supply chains, pricing strategies and accounting systems, and all this resultantly could lead to a messy start of the GSP Act w.e.f. July 1.
The next impediment is that most of the small businessmen do not understand the new set of rules through GST. But the Union Finance Minister has himself assured, “Government will extensively support industry and the trading fraternity in understanding and implementing the new rules, during the three-month gap between the passage and nation-wide roll-out of GST.”

Implications of the GST: 

Some of the salient features of the GST and the implications through the implementation of the GST are listed hereunder:
  • The foremost implication of the GST is that it is going to add up to 2% to India's economic growth. This may be a big gain in terms of revenue collections, improved GDP figures. 
  • The GST may accelerate the inflation rate upwards and the increased inflation rate may become a big headache for not only the RBI and the Union Finance Ministry but also for Narendra Modi Government. 
  • GST will help to attract more foreign direct investments across various sectors due to tax transparency and ease of doing business. 
  • According to Pullela Nageswara Rao, Chief Commissioner of Central Excise, Customs and Service Tax, Kerala, “Implementation of GST will help trade and industry and there is no need to have any room of concern about its implementation, and GST is indeed a good tax," 
  • Investors will have to shell out more for buying mutual fund products after the implementation of the GST. 
  • Chartered Accountants in India will have huge opportunities and challenges before them when the GST is implemented and the CAs would have to play a vital role in addressing issues such as curbing black money. 
  • Hospitality and luxury industry experts have said implementation of the GST will benefit the Hospitality Sector by lowering costs for consumers and facilitating seamless movement of the products across the country. 

Special Note # 1: 

The word “GST” (Goods and Services Tax) was first of all used in his Budget Speech in 2006-07 by the then Union Finance Minister P Chidambaram in Lok Sabha on February 28, 2006.

Special Note # 2: 

Jammu and Kashmir Government is unlikely to implement the GST regime as it will take away the state's authority of legislating on taxes as GST compromises with its special position granted to the state under Article 370 of the Constitution of India. J&K is the only state in India that has the authority to legislate on all the taxes. 
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