In the next few hours, the country will have an entirely new taxation system for over millions of traders and business enterprises. With the launch of Goods and Services Tax reform at the midnight of June 30, India will join a group of 159 countries who have already implemented the GST but not necessarily in exact form. For instance, while India has placed four different rates for taxing products, many countries in the world have single-rate GST.
This is the first time in the history of independent India the government is going to test the water with the single biggest economic reform at this scale. While the government believes that it is prepared to rollout the GST, the traders and political parties - Indian National Congress, All India Trinamool Congress - are little circumspect about the preparedness, and whether the government could implement it properly. Bengal Chief Minister Mamata Banerjee recently called it "another epic blunder" after demonetisation. Regardless of the differences among the political parties and trade bodies, the Centre is all set to launch the GST.
Here's all you need to know about the GST and impact:
What GST means for buyers?
Existing taxation system allows the manufacturers, wholesalers and retailers to pass on the tax liability to consumers. And they - manufactures, wholesalers - do it because the current system does not have any provision that could allow them to recover the taxes paid on multiple stages. However, under the GST, the tax liability cannot be passed on to the consumers, making products cheaper for the buyers. Apart from this, the prices after the GST will change for a lot of products.
What GST means for traders?
The GST will change the way traders operate and conduct their business operation. The GST is completely technology-based system that will leave no space for any manual work in the entire tax filing process. Business enterprises or traders, no matter how small or big, will all have to invest in technology and acquire new software to execute the tax filing. Once the GST is launched, everything will be online. While it's true that it will streamline the tax filing at the same time it will also create problems for small scale traders who aren't that familiar with the technology and new tax regime. It will make these small manufactures and traders heavily independent on tax professionals thereby forcing them to comply instead of evading the system.
How to migrate to the GST system
Traders or businessmen who have annual turnover of above Rs 20 lakhs (Rs 10 Lakhs for Northeastern and hill states) will come under the new tax regime. They have to register themselves and get PAN-based 15-digit Goods and Services Taxpayer Identification Number or GSTIN. New applicants will have to visit www.gst.gov.in. and fill in the required details. Once the details are filled, the applicants will get Acknowledgement Reference Number which needs to be submitted to download the Provisional Registration Certificate from "Download Certificates" on GST website from 27th June 2017. The GSTIN is somewhat similar to the existing Tax Identification Number (TIN). However, all the existing tax payers will now have to migrate to the new regime.
What is getting cheaper due to GST?
Daily-use food items like milk, curd, cereals and foodgrains will cost less as the GST Council has exempted these items under the new tax regime. And the common use products like hair oil, soaps and toothpaste will be charged with a lower tax rate of 18 per cent instead of present 22-24 per cent tax incidence thereby making these products cheaper by almost 4 to 6 per cent. Other food items like milk powder, butter milk, honey, dairy spreads, cheese, tea, wheat, rice, flour, sugar confectionery, pasta, spaghetti, macaroni, noodles, fruit, pickle, murabba, chutney, sweetmeats, ketchup and sauces will also get cheaper. Apart from the food items, the tax rate has also been lowered on products like groundnut oil, palm oil, sunflower oil, coconut oil. Household products such as cooking gas, note books, aluminium foils, insulin, agarbatti would also be less costlier after July 1.
What is becoming expensive due to GST?
Financial services like credit card bill, ATM transaction and the insurance premiums are going to be costlier. Personal care items such as shampoos, perfumes and make up items will see a jump in prices as the new tax rate for such products is 28 per cent higher than the current 22 per cent. The prices of products like TVs, ACs and washing machines will also go up under GST.