The roll-out of the Goods and Services Tax regime in 2016 will bring down the manufacturing costs, besides re-defining the logistics landscape of India, say industry and trade leaders.

Although there are still some apprehensions and issues to be sorted out, the Centre is keen on pushing ahead with this major tax reform, which was proposed in 2007, when an initiative was taken to examine the feasibility of replacing the current multiple taxes by a single tax structure.

Trade body Assocham today organised a meeting with stakeholders to clear some of these apprehensions and highlight the major benefits that the proposed GST will provide to the industry.

Multi-layered tax structure

The existing complex and multi-layered indirect tax structure has fragmented the Indian market into state markets by tax barriers.

Nihal Kothari, Chairman of National Council on Indirect Taxes, Assocham, said the existing tax structure posed various problems such as cascading effect on the cost of products and services, different tax treatment for manufacturing and services, higher cost of compliance and uncertainty due to frequent changes in tax laws.

“In this context, replacement of this complex tax system with a rational GST is imperative for India’s growth and competitiveness,” he said.

Although there is a broad consensus on the basic GST structure, some states still harbour the apprehension regarding possible loss of revenue during the initial phase of changeover.

Some states feel that an uniform GST covering all goods and services would take away their flexibility to collect higher taxes and hence they want some products to be kept out of GST.

“These issues are not difficult to be resolved, considering the significant benefits of GST. The other issue yet to be finalised is the modality of tax administration, especially for the small and medium enterprises,” Assocham feels.

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