The GST bill, which is scheduled to be effective from July 1, is the Biggest Tax Reform being undertaken since Independence. It will subsume all indirect taxes to create one rate and integrate the country into a single market. Once the GST is in force, it will replace at least 17 state and federal taxes and bring them under a single unified tax structure.
GST is a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services throughout India to replace taxes levied by the central and state governments. It is expected to bring about a qualitative change in the tax system by redistributing the burden of taxation equitably between manufacturing and services.
While officials are busy laying down the guidelines for an effective GST regime, the International Monetary Fund has already appreciated India’s effort to reform the country’s taxation system. “The government has made significant progress on important economic reforms that will support strong and sustainable growth going forward,” IMF Deputy Managing Director Tao Zhang said.
Last year on November 8, the Prime Minister scrapped old Rs 500 and Rs 1,000 notes in what he called a step to root-out black money and fake currency in the system. Six months later, it was noticed that the move couldn’t achieve the desired results as fake currencies were still running and corruption was still rampant. However, the government succeeded in profiling the people by getting to know the differences between the actual flow of money and the undeclared money. Recently, it was reported that India has more car buyers than the taxpayers in the country.
In the last assessment year, there were only 5.5 lakh people, out of the 3.65 crore individuals who filed returns, paid income tax of more than Rs 5 lakh, and accounted for 57 percent of the total tax collection. This essentially means that only 1.5 percent of those filing tax returns (3.65 crores) were contributing to 57 percent of the tax kitty. The Prime Minister wanted to address this issue by bringing the unaccounted money into the banking channel.
While many top-notch economists were divided over its impact on the economy, former UIDAI Chairman Nandan Nilekani hailed Modi’s demonetization move and said that it would see a massive activation of the Digitization of Financial services in the country. He also explained how India’s over 80 percent workforce will come into the formal channel, he said: “The more important thing is when the economy becomes formal when everybody’s financial transactions are digitized…India is going to go from data-poor to data-rich and that will make it more and more difficult for people to do dishonest things or to be outside the system. You will reduce the amount of black money in the system.