The Goods and Services Tax (GST)’s life starts on July first as the centre and states decided to merge more than a dozen of their small and big taxes under it. Now, nearly 70% of the country’s indirect tax revenues are covered under the GST.
Importance of the event is well reflected as the Parliament is going to hold a midnight function on its launch. The rare gesture shows the pain and effort taken by the centre and the states to give away their pet taxes since independence while creating the GST.
GST is rightly one of the biggest reforms since 1991 New Industrial Policy and the biggest tax reform since independence. It had the conceptual launch in 2000. But it took nearly seventeen years for the centre and states to succeed in producing the political understanding for the sacrifice their fiscal powers to create a tax regime where tax rates are set almost statically.
Looking forward, the GST will be a tax compliance experience for the tens of thousands of India’s firms and service providers. Success of the tax regime depends upon the speed in which the Small and Medium Enterprises get into the GST network. They have to attain sophistication and undergo fine-tuned training to come par with the administrative and technical requirements of the new tax system.
Understandably, the first year will be a trial period for the new tax system. For the administrators, the GST ecosystem comprising of the gigantic IT infrastructure of GST Network and enforcement mechanisms will give several lessons. All of these will make the GST administration and its running more efficient in future. For the time being Indian businesses can get ready for the mega event.