A new very important tax legislation in India launched by the Indian Government for growth. On August 3, the Upper House of the Indian Parliament approved the GST (Good and Services Tax, or the tax on goods and services), which is already configured as one of the greatest legislative reforms launched in India after the opening of the economy in 1991. The current Finance Minister, Arun Jaitley, has announced that the new law will enter effective as of April 1, 2017, coinciding with the new fiscal year.
This is a measure already proposed for the first time in the 2006-07 fiscal year, but which in that circumstance ran into a series of difficulties and was no longer implemented; ten years later the Modi government, after months of difficult negotiations, managed to get it approved and to achieve this important goal.
GST is shaping up of particular importance to the Indian economy. Specifically, through the implementation of this reform, it is intended to replace all existing indirect, local and central taxes (among which Excise Tax, Sales Tax and Service Tax) with a single lower feeGST: in this way it will be easier to implement the necessary tax controls, discouraging tax evasion.
But how will it work from a practical point of view?
GST is configured as a consumption tax e will be applied to goods and services at the time final consumption takes place: it will be included in the price of value-added goods and services, in every single step of the purchase or sale of goods within the entire production chain. The manufacturer, wholesaler or retailer will pay this tax, which can however be refunded as it is subject to tax deduction; it will therefore be the final consumer who will actually pay the tax. through this mechanism the "cascading effect" of taxation will be avoided, avoiding paying tax after tax.
New Delhi's goal is to create uniformity: the GST will in fact be unique for all goods and services, therefore the Central Government and all Indian states will tax goods and services with the same tax. For example, if the 20% is the percentage granted for a certain asset, the Central Government and the States will both collect the 10% and the revenue obtained will be divided between the two parties.
In this regard, it has been calculated that the effect of the introduction of the GST could lead to a reduction in prices equal to 16%: this will result in a probable increase in consumption and employment and in one increase in foreign investment.
This the process envisaged by the Government for the definitive implementation of the law:
The Modi government, after the campaign Make in India and the measures included in the latest Budget, continues in its own path of strong economic change in the country, with the purpose of create an increasingly open, dynamic and business-friendly context. The implementation of this major tax reform in India will facilitate the growth of the economy, the increase in domestic consumption and will facilitate commercial relations with foreign countries, attracting numerous international investors.
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