On Wednesday, the Centre seized themselves a historic moment passing all four GST Laws in the Lok Sabha, the biggest tax reform since independence. From July 1, it'll be 17 indirect taxes vs one, a move that law makers have long painted a fantastical image of how tax compliance will improve and bring home untold treasure.
From bumping up GDP growth by 1-2 per cent to goods getting somewhat cheaper for end consumers as the overall tax burden reduces by 25-30 per cent, to making Indian products competitive in international markets, the unified tax reform has all the necessary ingredients of being a blockbuster.
One can hear the drum beat from those quarters that made this giant animal called 'one nation, one tax' regime, a reality, but behind the scenes, the finance minister and his counterparts have to approach the complex classification of goods with more realism and urgency.
The proposed tax rates range from 5 to 28 per cent, with 12 and 18 per cent being the standard rates. However, it has not been decided yet which tax rates will apply to which category of goods. This is crucial, as the government and the industry have locked horns in the past with the latter often eyeing lower tax slabs. The Centre also has to pay a compensation bill worth thousands of crores to states for five years, much like the arrangement made during VAT rollout, denting its own finances.
Some amount of chaos cannot be ruled out, as the over 8 million PAN-linked tax assesses begin filing monthly electronic receipts starting August. This gives tax sleuths the much-needed ammunition to enforce compliance and generate higher revenue to the exchequer.
However, there are some goalposts that need to be met before GST comes into effect like passing of state GST laws, framing allied rules and bringing in lucrative pieces like alcohol and petroleum, currently out of the GST perview, which the Centre hopes to achieve in a year. Until then, the monetary gains will remain somewhat lacklustre.