Goods and Services Tax, which will come into effect since July 1, is going to be a game changer for the country’s indirect tax regime. It comes as second big reform by the Modi government at the Centre within less than 9 months. The roll-out of GSTis scheduled to take place in the midnight of June 30.
Reliance Group chairman Anil Ambani said that there are many ways of counting the benefits of GST; and as many of counting its costs. But there is just ONE way of describing its true promise. GST is not just another piece of reform or transform, however significant. GST is the liberation of our economic imagination. It is our economic freedom.
According to Ambani, of all our earthly inventions, the free market is perhaps the greatest force for economic good in human history. A force for generating wealth and transforming lives. The real promise of GST is that promise of economic liberation. The promise of `One Nation. One Tax. One market.’, he said.
GST, the biggest indirect tax reform in independent India, is associated with a lot of noise these days, some good some bad. When we look at this reform, it may disrupt the system for few days, may be weeks or months as people are not yet fully ready for the execution. Inventory pile up, reconciliation of stock-in-trade and a host of other issues may create a bottleneck for some time, Motilal Oswal, CMD of Motilal Oswal Financial Services said.
The street will react to the initial disruption, not because it is very severe but more because Nifty is trading at rich levels and pregnant with expectations of better corporate earnings. We believe, Nifty may retrace to 9200-9250 levels and will resume the next rally from there. One should be ready to deploy more money in equity instruments at lower levels.
When it comes to long term, this new system will act as a much better taxation grid as it will convert the county into one single market and we will be very clear as to what is the final price available pan India. This taxation regime will also eliminate the States vs Central finances and credit within the system. This will also bring in taxation at the source and will eliminate the loopholes associated with indirect taxation, Oswal said.