Why GST is must for Make in India? Best intraday tips for commodity

With GST highly unlikely to see the light of the day on April 1, 2016, the Make in India dream appears to be under threat at this stage.
GST in india
One of the dream policy initiatives of the PM is the Make in India project that would enable India to become a manufacturing hub. The initiative is particularly important because of the sluggish domestic manufacturing sector and the need to attract foreign investment. If implemented well, it will create employment/job opportunities for the burgeoning jobless youth of the country.

In order to make India a manufacturing hub, it is imperative that the foreign investors/companies find it conducive to do business here. One of the major impediments to a smooth business, especially in the manufacturing sector, is the uncertain and unpredictable indirect tax regime.

Current indirect tax regime
The current indirect tax system is plagued with a multiplicity of taxes – at different rates – at multiple points. Further, an absence of any setting off mechanism results in cascading effect of these taxes. This is accentuated by a huge compliance cost that is incurred in respect of each of the taxes.

All this aggregates to huge tax cost for the manufacturing sector, which is clearly unsustainable in the current scenario. Also, the inefficient dispute resolution system in the current indirect tax regime has left the foreign companies and investors high and dry. At the same time, the foreign companies have turned to China and found its systems of SEZ and export zones more attractive and certain in comparison to that in India.

Proposed GST system
The proposed Goods and Service Tax (GST) is a destination based indirect tax that will be levied on supply of goods and services, which is set to subsume the various indirect taxes currently levied by the Centre and the states including excise duty, service tax, value added tax (VAT), Central Sales Tax (CST), purchase tax, octroi, entry tax etc. These taxes are levied at various stages viz manufacture, sale, entry of goods, rendition of services etc.

Note: 100 mcx accurate tips  operator based calls 

100 accurate commodity tips  best intraday tips for commodity

The proposed GST structure is two-tiered, whereby tax would be levied by both Centre and state on an intra-state supply of goods or services viz. the Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) respectively. Credit of the above taxes would available throughout the entire supply chain and the ultimate burden would be borne by the customer.

In case of inter-state transactions, Inter-State Goods and Service Tax (IGST) would be levied by the Centre. Also, the Constitutional Amendment Bill provides for the creation of a GST Council comprising all the stakeholders across the Centre and the state. The GST Council would recommend the rate of tax with bands.

ALSO READ:   What is 100-200% Returns of Your Capital Every Month

Clearly, the implementation of GST would result in the abolition of multiple taxes and would bring the much-needed uniformity and certainty in tax rates. GST would also ensure that tax at each stage is creditable thereby avoiding double taxation. Also, the manufacturers need to deal with only three laws that are a Central law for CGST and IGST and State law for SGST.

Impact of GST on the ‘Make in India’ initiative
The current indirect tax regime is clearly one of the biggest hindrances which have adversely impacted the domestic manufacturing sector, as well as flow of foreign investment to the sector and introduction of GST, is important to alleviate the situation. GST would reduce the cost of manufacturing both from a tax perspective as well as on compliance front.

Roadblock to the introduction of GST

GST Experts in India
Nand Kishore, Partner – Taxation, HSA Advocates Nand Kishore, Partner – Taxation, HSA Advocates The Constitutional Amendment (122nd) Bill, 2014 for amendment of the Constitution of India to introduce GST was introduced in the Lok Sabha on December 19, 2014. As the current Government had ample majority in the Lok Sabha, the bill was passed by the lower house on May 6, 2015. However, due to lack of a majority in the Rajya Sabha, the GST has hit a roadblock at the Upper House of the Parliament.

GST still has a long way to go before it is finally enacted. After the Bill is passed in both the Houses of Parliament by two-thirds majority, the Bill will be sent to the State Legislatures for ratification. The ratification by at least 50 per cent of the State Legislature will be required before the proposed Constitution amendments are brought into effect.

Thereafter, the Parliament would be required to legislate laws pertaining to CGST and IGST. The State Legislatures would legislate laws relating to SGST.

The current conundrum
Going by the current conundrum, whereby the Bill has been blocked by the opposition owing to political reasons, it appears to be highly unlikely that the GST would be reality even on April 1, 2016, as was promised by the Finance Minister during his Budget Speech.

In a recent development, the government was contemplating reconvening the Parliament’s monsoon session, which was adjourned sine die on August 17, 2015 owing to continued disruption by the opposition. However, the government failed to arrive at any consensus with the opposition and hence the house could not be reconvened. As per media reports, the FM appears to have admitted that the GST would not see the light of the day on April 1, 2016.

The above development is clearly a major setback and has dented the confidence of both domestic manufacturing companies and foreign investors & foreign manufacturing companies, who were looking forward to GST which could have revived their interest in the Indian manufacturing sector. The Make in India dream to convert India into a manufacturing hub appears to be threatened at this stage.

As per certain recent reports, a foreign company proposing to set up manufacturing units India has been advised not to invest on account of uncertainty on the introduction of GST.

GST: A national agenda
The repeated blocking of the passage of the GST bill in the Parliament by the opposition, in the recently concluded monsoon session was unequivocally condemned by the industry. Though, this had no impact and no business was allowed to be conducted during the entire monsoon session, the need of the hour is for the industry to speak in one voice and continue its push for rolling out this reformative legislation.

GST is an apolitical issue and is much needed indirect tax reform to usher in a manufacturing revolution in India. GST is not only investor or business friendly but also consumer friendly. Also Make in India should not be viewed as a political agenda but a national agenda, which would put India as a strong global player in the global map as a manufacturing hub and simultaneously create job opportunities to the youth of this country.

GST is the need of the hour and any hindrance to its enactment, whether political or otherwise, is clearly unwarranted and not in national interest.

Source

Leave a Reply

Your email address will not be published. Required fields are marked *