Arun Jaitley says GST will benefit all: A look at India’s biggest tax reform


Finance Minister Arun Jaitley has moved four GST (Goods and Services Tax) bills in Lok Sabha today. Calling it a revolutionary step which would benefit all, Jaitley said both states and the Centre had pooled in their sovereignty into the GST council. Speaking in the Lok Sabha, he said 12 meetings of the GST council were held to make it a process based on consensus and recommendations.

India’s most ambitious indirect-tax reform is likely to roll out from July 1.

How well do you know your GST? Here’s a brief explanation of its various aspects:

What is GST?
The Goods and Services Tax (GST) will replace nearly a dozen central and state levies into a single national sales tax. It will make the movement of goods cheaper and seamless across the country. It would be far simpler than the current system, where a good is taxed multiple times and at different rates.

What will be the rates?
There would be four tax slabs of 5, 12, 18 and 28 per cent, plus a levy on taxes on luxury items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years. The GST council is yet to decide which goods fall in which slab. The GST rates will remain broadly in line with the existing rates. To keep inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.

How will consumer benefit from the GST?
With the implementation of GST, consumers will not be subjected to double taxation. All taxes that are levied while purchasing good will include both the central government’s taxes as well as the state government’s taxes. The move would deter state governments from indiscriminately increasing taxes fearing public backlash.

What economic impact will it have?
GST can boost economic growth by as much as 2 percentage points, according to Finance Minister Arun Jaitley. Greater tax compliance has the potential to boost revenues for the government, helping narrow Asia’s widest budget deficit and allowing more funds to be allocated to schools and highways.

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How will the GST affect businesses?
Companies will have to overhaul their accounting systems, which may involve one-time investment costs. There may also be chaos in the short term as the government gets the computer software up and running. The government has trained 49,000 officers of the states and the Centre till last week. GST Network (GSTN)—GST’s IT infrastructure arm—and CBEC together will now conduct trainings so that businesses know how to file their returns

Also read: ? GST debate now continues on categorisation of products

Which sectors stand to gain the most?
Logistics companies stand to gain as it becomes easier to ferry goods across India. Other sectors largely depend on the fine print of the GST, including exemptions.