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Will GST cause chaos?

June 27, 2017 | Expert Insights

On 1st July 2017 India will adopt the Goods and Service Tax, a new tax code, which would turn India into a single market. As India approaches the countdown various businessmen, accountants and industry groups are raising their concerns over the success of this new tax regime.

Background

Prime Minister Modi has been campaigning for GST since 2014. Goods and Service Tax is a value added tax, which is multi-stage and destination-based taxation on each stage of good and service production as well as generation. It is part of his economic agenda to reform India. Earlier this year, PM Modi adopted a radical economic agenda in the form of demonetization which met with numerous criticisms and whose success is yet to be determined. Experts believe that the new tax code would face similar criticisms and would result in chaos in the country.

Analysis

There have been both positive as well as negative reactions towards the introduction of GST. Economists believe that it could boost output up to 2% if executed and administered well. On the other hand, All India Manufacturers’ Organisation claims that GST should be handled carefully and meticulously and there ought to be systems in place to address problems that may arise. The industrial group raised its concerns over the government rushing in the implementation of what is a long-term tax reform.

The other issue which companies are now facing is in regards to the digital filing of tax returns. Chairman of GST Network Naveen Kumar has stated that companies are stressed and are working overtime in order to fully comprehend the new tax regime and the procedures to file the tax returns. Partner of KPMG Mr.Harpreet Singh has also noted that not all companies would be able to file tax returns by 1st July and the next few months in India would be disorganized.

Assessment

GST is a revolutionary step adopted by the Modi government. Though there have been concerns regarding the success of the same, it is necessary to let things take the due course. Every piece of legislation introduced in India requires a certain time frame to be completely operative. The government also needs to be considerate of the problems the citizens would face while adapting towards the new tax regime. The tax is however far from perfect and the roll-out can cause a lot problems for the citizens as well as for businesses. And since the GST is so complex, it may not quite have the ability to completely transform the Indian landscape. But it should be given the chance to succeed.