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Indian Trade Body Backs GST

by Mary Swire,, Hong Kong

12 August 2011

A national Goods and Services Tax (GST) could increase economic growth in India by 1.4% to 1.7% with an annual revenue increase of INR1.2 trillion (USD26bn) for the government, according to a study conducted by Indian trade body the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

While a constitutional amendment is currently being considered by a Parliamentary Standing Committee, next financial year (April 2012 to March 2013) is the time set for implementing the GST which is planned to be a comprehensive value-added tax on goods and services levied at each stage of the supply chain.

“With a significant reduction in tax administration costs due to simple uniform structure, overall cost, and thus prices, of goods manufactured locally may reduce by 10%,” said the Chamber.

The GST will create a single Indian common market with supply chain efficiencies and scale up the economy, said ASSOCHAM’s recent study. There will be no distinction between goods and services with seamless input tax credit allowed throughout the supply chain.

“Thus GST will be a destination-based consumption tax borne by the ultimate consumer. It is crucial for international competitiveness, revenue buoyancy and economic growth. GST will be the biggest game changer for all stakeholders – industry, trade, investors, central and state governments and consumers,” ASSOCHAM said in a statement.

State GST on electronically transmitted inter-state services will be a major challenge if states apply different rates, according to the study. Accounting and information technology systems will also need to be aligned so that required details can be accessed to avail full input tax credit and avoid tax losses.

TAGS: tax | business | India | goods and services tax (GST) | services

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