Select Your Location
GST was introduced by the Indian government to reduce tax evasion and build up a strong tax collection structure. One of the major characteristics of GST is that it supports the domestic traders to face the competition in domestic as well as the international market. Here we will analyze how smoothly the GST transition India can take place, and the lessons learned from countries that have already implemented GST.
Table of Contents
GST was first introduced in France. Some other countries which adopted the GST regime are Singapore, Malaysia, and the UK. In this article we have described about GST Transition India – A Global Analysis, GST Registration.
In the given scenario, India can learn a lot from these countries as to how Goods and Service Tax can be smoothly launched and other post-implementation points to be taken care of.
The first and foremost point of importance is the implementation of the new tax regime. It is the duty of the government to ensure smooth implementation and migration procedures. Such procedures are required to be made keeping in mind the objective of a smooth GST transition India. Enough information must be supplied to the taxpayers about the implementation and their role in the process.
If there is a lack of communication on the part of the government, then the implementation can face a backlash from the people, leading to unnecessary chaos and confusion. This happened in the case of Malaysia, where the government provided a long transition period of 1.5 years and still faced a backlash from the people.
India has adopted the Canadian model of Dual GST, where tax is charged at federal as well as state levels. In many countries, this segregation is not defined and only one tax applies. This dual tax system might result in further complications as different states are free to draw their interpretations and define their rules regarding such state taxes.
In order to expand the tax base, it has been advised to lower the tax rate. Low tax rates encourage the taxpayer to come forward and register. On the other hand, if the tax rates are on the higher end, taxpayers feel discouraged and this will result in tax evasion.
This is the reason many countries like Singapore introduced lower tax rates in the initial stages of implementation of GST and gradually increased them to build up the tax base.
However, the Indian government has set the tax rates at 5%, 12%, 18% and 28%, and only staple foods are excluded from the criteria. The government is taking a bold step by not opting for a safe option.
Under the GST, all the taxpayers including small, medium and large enterprises were equated as the same and were taxed at the same rate. Even the exemption threshold was kept at 20 lakh, which results in bringing them all at par. This exemption limit was doubled to 40 lakhs for MSMEs and for north-eastern states its 20 lakh. It is a good thing as it expands the tax base, but it poses many difficulties for SMEs to comply with all the provisions with their limited resources. This is the reason countries have set the threshold limit at higher levels, for example, in Singapore this limit is at 4.8 crores and in Malaysia, it is at 75 lakhs to give some relief to SMEs.
These SMEs are granted some relief in the form of the Composition Scheme, but it comes with its share of shortcomings, as any taxpayer registered under the same cannot avail input credit, nor can they collect taxes from their customers.
In order to ensure proper working of any tax system, the most crucial part is that it has clearly defined procedures and a fast credit payment system. An effective payment system and a related infrastructure are required for this purpose. In the absence of which, proper cash flow will be adversely affected.
In the current GST regime, if there is any delay on the part of the supplier in the filing GST return, then the recipient cannot receive input credit on time. It will, as a result, increase the cost of business for such recipients.
Indian tax regulators should take a lesson from other world economies who have suffered the same issues and introduced a more effective mechanism.
The government should take effective steps to ensure that the implementation of GST does not result in inflation. The main objective of the introduction of GST is to eliminate the tax on tax effect, thus reducing the costs of goods and services. But many people may take unlawful routes to exploit the final consumers who are not well aware of these provisions.
It is the responsibility of the government to make precautionary anti-profiteering policies to protect such consumers of goods and services. This is very important as many countries faced the same problem as did Singapore when it introduced GST in 1994; a hike in the inflation rate was noticed.
The proper execution of GST is highly required. GST laws may be new to many therefore it requires proper understanding. In case of any doubts on GST related laws, feel free to contact Enterslice.
Read our article:
GST on Legal Services in India: A Complete Outlook
Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has recommend...
The objective of the enactment of the Prevention of Money-laundering Act, 2002, i.e. PMLA (the...
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Infrastructure and real estate have been regarded as India's "sunshine sector" since the turn o...
On 22nd May 2023, the Central Board of Direct Taxes (CBDT) issued a new circular under secti...
Are you human?: 9 + 5 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
After the implementation of GST for NGO, the two taxes which have been combined are, tax on goods is VAT and the ta...
17 Dec, 2020
Any person aggrieved by the decision made under the CGST Act, SGST Act, or UTGST Act can file an appeal under GST[1...
11 Oct, 2022
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!