GST’s customization: India’s own version may test businesses’ adaptability

The GST is considered to be the ultimate tax reform in indirect taxes globally. Several countries have adopted it and those who have unitary financial structure or where there is only one central government, GST launch is rather simple.

But in India’s case, the situation is much different. Merging of central and state taxes needed constitutional arrangements and political consensus. Indian conditions are also much different with the business communities consists of largely small and medium enterprises that have several hurdles to establish and manage the GST infrastructure.

It doesn’t mean GST is a higher order reform given the capability of the business community. Rather, the latter can adapt to the situations with time. Here comes the unavoidable pain that the country has to take for a good cause.

                The government has also made careful arrangements for the business to adapt to the requirements. Besides preparatory time, the September 15, 2017 extended timeline is enough for the businesses to come term with the mega tax reform. After demonetisation, both businesses and general public have attained an attitude to undergo changes for a future benefit.

A major feature of the country’s GST launch is its significant customization.

In contrast to the global practices, there are several rates – 5, 12, 18 and 28. Besides these, there is the 0, 0.25 and 3% rates. The burden of multiple rates is on administration. When tax credits are estimated while calculating the tax impact of the final produce, there will come much complexities. Perma-conflict between the tax administrators and the tax payers may arise. This will be the litmus test for the GST experiment. Early arrangements to minimize such instances will make GST smooth and a comfortable transformation. 

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