With live parliamentary debates beamed live into our homes all last evening and the subsequent breathless gushing on about the importance of the event, many of us were left wondering what the big deal was about the GST. Even after the sane, civil and high erudite (also highly unusual) level of debate we saw between the former and current Finance Ministers of our country and news anchor assertions that this was the most significant reform since independence, some of us were still not too sure what earth shattering event had taken place. Now that #GSTCleared, here are the answers to the questions you had about the Goods & Services Tax but may have been too embarrassed to ask:
Simply put this is one single tax and tax rate that will be applied across the country. Do you know what all taxes are levied on the price you pay for something? Yeah, neither do we. So now goods and services will not become more expensive as they cross the state borders. According to the Finance Minister Arun Jaitley, GST will make tax evasion more difficult, ensuring better income for the exchequer and will eventually bring down the inflation in the market.
The new Goods & Services tax envisions a single market for all of India instead of the smaller markets for each state. So the current hurdles of transporting goods from one to another state are significantly lessened.
Excise duty, octroi, entertainment tax, VAT, luxury tax and other methods of taxation will become history. Developed such as Australia, Canada and others have had this tax structure in place and it has worked very well for them.
While short term spike in inflation, but there will be lower prices eventually and more streamlined operations in the longer term. It is envisaged that it is the poor who will benefit the most from reduced prices of common commodities.
Since it’s a single tax that will be charged, there will be a single rate which could be anything between 5% and 27%. While the 17 or 18 are the numbers being bandied around, some states may push for higher rates.
So if GST is so great for us and politicians from the ruling party and the opposition seemed almost chummy about the passage of the bill yesterday, why did it take so long? The bill was first proposed during the time of Atal Bihari Vajpayee and BJP leadership and then during ten years of Manmohan Singh at the helm, the BJP strenuously opposed the version that Congress wanted to pass. Various states, fearing lower revenues and lesser control over economic issues also opposed the tax system.
Before we all cheer in unison, it is important to remember that there will be many hiccups before the system is in place. We may not see any real benefits for several years yet.
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