19 July 2017, 03:07 PM

GST integrates fragmented India into one market

GST integrates fragmented India into one market

“GST is a great step by Team India, great step towards transformation. This can’t be seen as a victory of a party or government, it is a win for the democratic ethos of India. We say a lot about corruption but to eradicate it is important to strengthen our system as well”- was how Indian Prime Minister Narendra Modi kickstarted the much awaited Goods and Services Tax (GST) at the wee hours of July 1, 2017.

The discussion on GST was first mooted in India in 2000 and now after 16 years has become a reality. Claimed by the government as the biggest tax reform since independence, the GST is expected to boost growth and scrap local taxes that add to overhead costs and stymie businesses.

The introduction of the GST is a great step and has been hailed the world over. The question remains as to how effectively and efficiently it will be implemented. The opposition political parties which have supported the implementation of the GST now claim that more time was needed for an efficient transition of the GST regime. A strong and comprehensive IT system would be the foundation for the smooth functioning of the GST regime and the country is still in the early stage of such an IT system, the opposition political parties argue.

Admittedly, a proper functioning of the GST system will take some time but the fact is that the nation has to begin the process and Modi has taken the initiative. India has now joined the group of countries which have already implemented the GST. France was the first country to implement the GST in 1954. Since then, more than 150 countries have implemented the GST law in some form or other. In many of these countries, VAT is the substitute for GST, but unlike the Indian VAT system, these countries have a single VAT tax which fulfills the same purpose as the GST.

What is the GST?