Long days of parley& finally the much-awaited GST is closing the gap from taking the Indian economy into newer meadows. But it was totally a startling strike from Finance ministry under the guidance of Prime Minister in demonetizing the higher denominations. But are these things connected? Or do they have any significance in future India? Well if you run down the framework, you might smell some divine aroma of cleverness in carefully implanting two crucial financial reforms under a tight timeline. Obviously, the later decision of demonetizing had some impact on the economy, but reading both GST and Demonetization with same specs might spark some dazzling notion.
For those who are still baffled with GST- ‘Goods & Services Tax’, it is a tax reform that combines all indirect taxes into a single tax for goods and services, thereby removing the state barriers and implementing a single tax throughout the country. GST ain’t a morning thought, but the foundation was laid in 2000 by then Prime Minister Atal Bihari Vajpayee, which was developed over a span of 16 years to finally become a part of our financial constitution. The bill was passed in both houses on the August 2016, which is planned to commence by April 2017. With its arrival,fiscal India is expecting alot of upturns and twists, which apparently might look a bit cumbersome but in the long run, it is going to be a relief.
Last month, the global rating agency Standard and Poor’s made a statement regarding the Indian financial revamping, according to which the short term downfalls are inevitable but the long term goals are surefire. But yet most of us failed to see the link between GST and demonetization. While note ban ensures a stability and GST might be a burden-free tax scheme. However one shouldn’t expect a straight advantage out of both, as per S&P’s statement the short term scrutiny might reflect some adverse impacts which led a drop in the growth forecast, which is fortuitously transitory. The obvious & foreseen advantage for this financial remodeling might be the reduced taxes, both direct as well as indirect one.
Demonization is hopefully expected to short live for the first quarter of 2017, whose impact might soon withdraw from the lives of common man, whereas it might persist in the banking and corporate sectors. But such an abrupt implementation has brought high magnitude changes in rural and informal sectors by expanding the money flow through digital services, which in reality would have been a burdensome task if it was through awareness. The New Year might bring some doles for the service sector especially the debit/credit card services since they are one of the major modes of payment in the backwash of note ban.
The GST on other hand is arriving with a number of benefits, which might cringe the face of tax chiselers. The transparency of GST is a two-way glass, such that Income Tax department can keep a track of sales whereas customers on the other can exactly know how much tax they paid. The tax scheme is carefully sculpted to avoid any hidden taxes that previously was so common for consumer products. The events tailing demonetization combined with GST is expected to drop the prices by a great magnitude, and the black money curfew will keep the inflation under control offering stability to theeconomy and prevent price variations. Worries shall be set aside because GST is implementing after a thoroughstudy, whose effects are meticulously estimated and anticipated by the ministry, however, all it remaining is to wind up the post demonetization campaign.