Goods and Services Tax

Introduction

• Goods and Services Tax (GST) is a multi-stage consumption tax on all Goods and Services

• GST is levied on supply of goods and services on each stage of the supply chain

• GST will replace separate Value Added Taxes (VAT) levied by the Centre (CENVAT) and States (VAT/Sales Tax)

• GST can technically cover 86% of GDP excluding only agriculture sector (14%) as per economic classification • 160 countries have so far implemented GST/VAT

 Malaysia implementing GST from April 1, 2015

Goods and Services Tax

What are the benefits?

• Common and unified national market

 Removal of barriers to trade

 Lower cost of doing business

 More fair, equitable and transparent

 Improved compliance resulting in reduced overall tax rates

• World Bank (India Development Update – Oct 2014)

 Delays due to road blocks, tolls and other stoppages will be down by 50% and freight time down by some 20-30%

 Logistics costs will be down by 30-40%

 Boosting competitiveness of India’s key manufacturing sectors by 3 to 4 percent of net sales

• Impact on GDP (NACER study commissioned by 13th Finance Commission)

 GDP can go up by 0.9-1.7% depending on assumptions

 Gain in Exports between 3.2-6.3% of GDP

 Import gain between 2.4-4.7% of GDP