NEW DELHI — In a historic move, after 14 years in the making, India’s Prime Minister Narendra Modi and Finance Minister Arun Jaitley finally unveiled to the public a new Goods and Services Tax (GST) bill on July 1, 2017. With the motto, “One Nation, One Tax,” India’s GST bill is one of the most comprehensive and momentous tax reforms since the country gained independence in 1947.
The new bill will galvanize other market reforms in the economy, significantly widen the tax base and reduce the regressive burden on individuals from poorer socio-economic backgrounds. It will also reform the structural frameworks of essential markets for the better.
Even though the GST bill has been opposed by rival regional political parties since its inception, a majority of stakeholders in the country have commended its implementation. Many business leaders have praised the adoption of India’s GST bill, as it will help make India one common market for the first time. The bill is projected to result in an increase in economic growth by about 1-1.5 percent.
A wide array of goods, from food and education materials to commodities and transport, will now be exempt from indirect forms of taxation. Consequently, the new bill will replace 20 indirect taxes at both the national and state levels.
With the inception of the new tax, border check posts in more than 22 states will be eliminated, thereby making the transportation of goods much smoother and more efficient. As food items and agricultural products are often perishable, they can now be transported longer distances without nearly as many hurdles.
India’s new GST bill is also being praised for its foresight in levying indirect taxes and excise duties on demerit goods like cigarettes. In a recent move, the GST Council has agreed to increase cess rates on cigarettes by nearly 31 percent.
Moreover, India’s GST bill will be efficacious in bolstering the farming sector, improving farming practices in the economy and unifying the agricultural market. The bill will cut the tax rate on fertilizers by 7 percent, and exclusive parts of tractors and other capital components by 10 percent, resulting in lower costs for key factors of production.
As indirect taxes levied on agricultural products will now be eliminated, farmers will be able to maximize their revenue further. The advancement and development of the National Agriculture Market (NAM) is also a very pivotal part of India’s new bill. It will help establish a common e-commerce platform and ensure more transparency and accountability.
India’s GST bill will pave the way for a more progressive method of taxation that is fair for all individuals in the economy. Farmers from rural communities will now no longer be financially burdened by a high proportion of income tax. This will help bridge the gap between the rich and the poor in the country. As the farming sector will be galvanized, the net real annual incomes of farmers are also presumed to rise in the future.
Moreover, India’s new GST bill will also make administrative matters easier to address, due to the unification of the market. Tax collection from entities will become easier, making the taxation system more reliable.
A very distinct and essential part of India’s GST bill is its potential to tackle the level of corruption prevailing in the country. Transportation and Agriculture sectors are often shadowed my middlemen and bribes. Under the new bill, state commercial tax department check posts will be eliminated, thereby eliminating this particular risk. Discussions have also been centered around merging tax collection at check posts.
Overall, India’s GST bill has been the product of the collaborative efforts between the central government, businesses, people and various political parties. It will bolster the position of key sectors in the economy and economically empower thousands of individuals. The taxation system of the market will now be fairer and more equitable, thereby paving the way for a more sustainable future.
– Shivani Ekkanath