03/08/2016

EXPLAINED:WhatGSTmeansforeconomy,corporateandcommonmanMoneycontrol.com

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Aug 02, 2016, 01.33 PM | Source: Moneycontrol.com

EXPLAINED: What GST means for economy,

corporate and common man
GST would subsume other forms of indirect taxation, making it easier for businesses to comply with the tax
regime. Being a multi-stage tax, GST provides for an input tax credit mechanism (to claim set-os for tax paid
in the prior stages of production / distribution), which is expected to encourage better invoicing and voluntary
compliance

1 Comments

Moneycontrol Bureau
(Edited excerpts from a Morgan Stanley titled GST- In a nutshell)
What is Goods and Services Tax (GST)?
It is a broad-based and comprehensive tax on manufacture, sale and
consumption of goods and services at a national level.
What is the objective of GST?

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EXPLAINED:WhatGSTmeansforeconomy,corporateandcommonmanMoneycontrol.com

To remove multiplicity of taxes across states to create a single national taxation system, as well as a single common
market
How will it work?
GST is envisaged as a consumption tax, and hence the tax is passed on until the last stage, wherein the customer of the

Govt to move 4-5 key

amendments in GST
Bill: Sources
Experts explain:
Problems that GST may
face post passage

goods and services bears the tax.

What are some of the key ineciencies of the current tax system?
The current tax system of CENVAT (central VAT) and state VAT (SVAT) suers from multiple layers and a cascading burden
of taxes. The state VAT provides for tax credit for intrastate transactions (within a state), but the present system is unable
to provide tax credit for inter-state transactions.
How will GST help?
GST would subsume other forms of indirect taxation, making it easier for businesses to comply with the tax regime. Being
a multi-stage tax, GST provides for an input tax credit mechanism (to claim set-os for tax paid in the prior stages of
production / distribution), which is expected to encourage better invoicing and voluntarycompliance.
How does the government benet?

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The easier tax structure along with broader tax base (fewer exemptions, and taxing all goods & services) would help to
increase revenue collections for the government.
How do corporates benet?
Companies decisions to set up production operations would be inuenced not by tax benets but based on core business
eciency. Also, with the destination-based principle and provision to claim input tax credit, taxrate applicable on exports
is likely to be zero, increasing the competiveness of Indian rms

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headwinds rst: ICICI Pru MF

What type of GST structure is likely to be implemented in India?

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EXPLAINED:WhatGSTmeansforeconomy,corporateandcommonmanMoneycontrol.com

The nature of GST to be implemented is widely expected to be the Dual GST model with concurrent powers to both center
and state to tax both goods and services over a common and identical base.
What is the standard GST rate likely to be?
The Chief Economic Advisor-led panel report has recommended the standard GST rate (which would be applied across all
services not specically specied) to be 17-18 percent
How is GST expected to impact ination, growth and public nances?
Implementation of the GST in the near term could bring some uptick in ination, but growth and public nances to be
aected positively. Moreover, inationary impact, if any, should be transitory.
Which sectors stand to lose, gain from the implementation of GST?
Consumption (warehousing consolidation), logistics (more movement of heavy vehicles), house building materials (lower
duties), and industrial manufacturing would likely experience a positive impact; oil & gas could see a negative impact,
while cigarettes could see a negative impact only if overall tax incidence goes up, which may be a low-probability event.
The remaining sectors would likely see a neutral impact.

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