GST TAXATION AND REFORMS IN INDIA

11 Abbreviations GST- Goods and Services Tax CGST- Central Goods and Services Tax SGST- State Goods and Services Tax VAT- Value Added Tax CPIB- Consumer Price Index Basket MNEs- Multinational Enterprises Introduction The world is divided into various continents that are composed of specific nations that are independent. Each of these countries is run through different policies, rules, and regulations that are administered in sectors including the political, economic and social factors. These factors are important because they determine the well-being of the citizens and the relationship that a nation forms with the outside world. The economic aspect is usually of great significance because it determines how independent a country becomes and the quality of life that different communities within a specific location can maintain.

The economic status of a nation has resulted in the division of nations with most of the African countries considered to be developing or undeveloped while others like the United States are considered to be developed nations. The GST taxation became the biggest and ambitious reform that India made regarding taxation policies (Sehrawat et al. pg133). The main purpose of the change was to introduce a unified market that would help to dismantle economic barriers across the states. The reform would help to eliminate the multiple taxes by subsuming indirect taxes under a specific regime. While the indirect system opted as a way to reduce the gap between the poor and the rich in India, major challenges such as distortion of tax on production of services and goods, cascading issues among others which lead to slow economic growth were associated with the method.

While on the other hand, the advancement in technology and communication systems have increased transparency in taxation, on the contrary, the increased international trade has led to complexity in the current systems. The cost of products and services is determined by the tax that the government imposes on these products. On the other hand, the price that an organization sells the products that services they provide to the public influences companies directly or indirectly. Therefore, the tax is a significant contributor to any business decisions that individuals and organizations make. Tax policies do not only affect how people in a nation carry out business but also determines the level of foreign direct investments. The GST is a tax reform that promises to provide a chance revenue increment by 2% and also provide for the calibration of reforms that can be put in place in the future.

The GST, unlike the indirect taxation, offers a broader perspective that provides for a single comprehensive tax levy that is carried out on goods and services in a country. The system works by levies being imposed at every stage of business chain from production to the final consumption. India is one of the largest democracies in the world implemented this policy in an attempt to increase revenue rates and also to eliminate the indirect tax method which the government considered ineffective. While there are many people have expected high returns from the system, there are also concerns about the impacts and the implications of introducing GST in this nation. Apart from the four slabs, there are also the 0% and those that exceed 28%.

More than a half of the products that are purchased by the common man in the CPIB (Consumer Price Index basket) will not incur any tax while luxury goods such as aerated drinks and cars will see a 28% plus fee charged. While different models are associated with GST, India opted to follow the dual model. This model consists of both the CGST and the SGST carried out along the supply chain apart from goods and services that are exempted and treated separately. An input tax credit is required to be made for the tax that is paid against the CGST while a similar credit is made for the SGST. On the contrary, businesses do not have to get multiple registrations making the process of starting a business in India much more accessible.

With the GST taxation, the companies in India will be able to enjoy a reduced burden of taxes they pay hence decreasing the amount of money used during production. A reduction in production cost means that the exporters from India will become more competitive not only at the national level but also at the international market. On the contrary, there are also major concerns that have been associated with the introduction of the GST system. One of the challenges is the increased cost of compliance for businesses as a result of the use of dual control. While other nations have adopted this method, the models are diverse with India opting to utilize the dual system that includes the CGST and the SGST.