A historical bill was passed in 2016. India became part of those developed countries that have seen the positive impact of this economical change. When the Goods and Service Tax (GST) sees light of the day, the way India does business will change, forever. So how does it impact our economy?
- Unification of the market:
At present, our country is like a continent with our states behaving like countries in terms of population and culture. Imagine doing away with entry-exit barriers, export-import duties – moving assets is going to get easier with lower logistics.
- Better cash flow:
With no more excise duty on manufacturing, there is bound to be an improvement in cash flows and inventory costs since GST will now be paid at the time of sale/supply rather than at the time of removal of goods from the factory.
- Boosting investment:
GST is set to cover all kinds of capital goods and investments for input tax credit, which will eventually help more capital to be pumped in into our economy.
- Reducing duplication and compliance cost:
Eliminating the current regime of multiple indirect taxes, GST will bring in considerable clarity in terms of indirect taxes. Multi-city taxes on same transactions will be avoided, simply termed as a cascading effect of tax, or a tax-on-tax effect.
- Pricing and profitability:
A number of products will be repriced – with an increase or decrease. Margins or price mark-ups will be re-examined particularly in industries like automotive, retail and FMCG.
Businesses have been forced to transform with GST; it involves identifying, addressing and leveraging a new tax structure, exemptions and concessions, cash flows and refunds, supply chain network and governing rules and regulations and compliance framework.
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