Three years of Modi sarkar: GST will cut down on inefficiencies in supply chain

Three years ago, when the Narendra Modi-led government took charge, the goods and services tax (GST) topped the wish list of every analyst, many of whom believed that India was unlikely to see it implemented before 2020. Three years later, most find it hard to believe that this gamechanging reform could be in place in a few weeks. GST is proposed to be launched on July 1.

But three years ago, GST didn’t seem like a cakewalk. Modi, finance minister Arun Jaitley and a team of trusted officials did not leave any stone unturned to ensure that the reform not just remained on track but also moved ahead with speed.

Modi himself reached out to the opposition to get it on board while Jaitley accommodated most demands of the states in true federal spirit. It is no mean feat to get the Constitution amendment ratified sans adequate numbers in the upper house and the very framework in such short span.

Bye to Artifical Boundaries
The GST is about to change the complete taxation landscape of the country as it replaces multiple state taxes such as value added tax, purchase tax, octroi, entertainment tax and central taxes including central excise duty, countervailing duty, services tax, cesses into a single levy. It will bring down artificial boundries within the country created by taxes to facilitate unhindered movement of goods, creating a seamless national market.

Seventy years after Independence, Indians all over the country will pay one rate of tax for a good or a service irrespective of where they consume it in India.

Boost to GDP
Economic think-tanks estimated GST to give a boost of 1-2% to the GDP. GST will ensure that a good or service isn’t taxed twice and taxes paid are available as credit. Industry and consumers suffer tax on tax now that inflates prices.

The new tax will cut down on inefficiencies in the supply chain as a single tax rate allows them to use a single channel to cater to different regions. Overall demand should get a boost from the switchover to GST as these efficiencies drive down prices of goods.