A landmark reform, India today switches to a new indirect tax system, the Goods and Services Tax. The GST subsumes the multiple Central, State and local taxes and cesses levied on goods and services, unifying the country into a single market, thereby making it easier to do business and ensure tax compliance. This will attract investors and more efficiently mop up revenues for the exchequer. The reform has been years in the making, and having shown the political will to finally pull it off, the Central government must work with the States to chart a road map to simplify the tax regime. Currently there are multiple tax rates ranging from 0% to 28%, plus a cess on some products, creating incentives for lobbying and rent-seeking. The level of preparedness for the new tax system too is not optimal, with sections of industry, trade as well as the bureaucracy visibly anxious about several aspects of the GST’s operational and legal framework. In response, the date for businesses to file the first GST returns has been deferred. The generation of e-way bills for moving goods worth over ₹50,000 too has been put on hold, along with the requirement for e-commerce portals to deduct tax at source from small sellers. The GST Network, which will digitally capture billions of transactions daily, was not able to test its software in advance; and there is concern about the preparedness of intermediaries mandated to help businesses transition to the completely electronic compliance system. The coming days therefore could test the system, and the capacity of the authorities to think on their feet will be vital.
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