www.cakart.in or Goods and Service Tax is most likely to be rolled out from April 2016. The bill has been passed by the Lok Sabha and is pending aproval in the Rajya Sabha. The Narendra Modi led Government has made it look possible for the Indian Economy. Though it had the majority in the Lok Sabha unlike in Rajya Sabha.
It is being flagged as one of the most vital reforms for the Indian Economy which should have been enacted way back, but as they say “Better Late, than Never”. Once the GST becomes applicable it will not only simplify the Indirect Taxation System but will also have extremely positive effects on India’s growth.
Where Multi-National Companies are eagerly waiting for the GST applicability the Indian based companies and new start-ups are also in favour of the same. Different industries will be affected with the applicability of GST but the E-Commerce is a best fit industry for the GST workabiltiy and will benefit the most. As when implemented, GST will be a comprehensive tax regime applicable across all Indian states on the sale, manufacture and consumption of goods and services, essentially converting the country into a unified market which is suitable for the E-commerce Industry.
GST will replace some sixteen taxes in all like, Central VAT (CENVAT), Central Sales Tax (CST), Central Excise Duty, Additional Excise Duty, Special Additional Duty of customs (SAD) to name a few. Thus simplifying the complicated tax structure and also reducing the compliance costs.
At present there is no specific tax law which regulates the E-commerce industry in India. It leads to confusion as well as difficulties in compliance of different applicable laws in differnt states. But with GST, which makes no distinction between goods and services, e-commerce companies will not have to deal with complications of individual state tax laws.
As per the present applicable tax laws, when goods are sold they are subject to excise tax (applicable on certain goods), state specific VAT (intra-state sale) and central state tax at the buyer state (inter-state sale).As per the current regulations the VAT is adjustable such that a trader or distributor pays VAT on the value add component. However, Central State Tax (CST) is not adjustable and once paid, it cannot be adjusted and this being the main reason why the inter-state transactions bear a tax disadvantage compared to intra-state transactions across many commodities in B2B commerce.
This disadvantage will be taken over by the applicability of GST and will change things for the better for the E-Commerce indusrty. GST will replace CST and thus companies will need not pay the additional tax which adds up to the cost of the products in their hand. The GST also simplifies as now they will not have to worry about the state from which they are buying.
The introduction of GST will also simplify the logistics desicions as currently the B2B E-commerce industries are bound by the individual state tax boundries and the regulations thus they have to make desicions for sourcing and warehousing based on tax implications rather than convenience, distance or other strategic considerations. After GST applicability instead of maintaining several warehouse, companies can now plan to have fewer larger warehouses located strategically for decreasing the operating costs and also to simplify the logistics.
Thus, implementation of GST will have the prospectives for the E-commerce industry to grow exponentially and this in turn will also benefit the manufacturers and customers both.