GST - Get Set Go

India largest reform, Goods &;;; Services Tax regime implementation is a step closer, amalgamating a number of central and state indirect taxes into a single levy. The finalization of rate structures for goods and services, although subject to formal approval by the GST Council, has set the ball rolling for a pan-India GST rollout by July 1. As the GST Council has finalized the rates of the new tax for most goods and services, the companies and the other tax payers must start adjusting their accounting systems to roll out the new tax at the earliest. ;;; The implementation of GST will allow free flow of tax credit in intra and inter-state transactions leading to more efficient markets and leaner tax structure. Following are the changes that the economy, the government &;;; the common man will witness post implementation of the new indirect tax system:

• Inflation neutral for most of the goods: The tax rates have remained comparable to the effective tax faced at present. However, for some of the food, agro products and items of daily use like soap, hair oil etc. the new rates are considerably lower. As a result the overall impact is likely to be inflation neutral.
• Life changes for the taxman &;;; tax payer: Tax monitoring will become easier on account of the robust GST Network platform where all returns can be accessed instantly in a user-friendly manner. This will help revenue officials in monitoring the sequence of supply of goods and services as well as flow of input tax credit.
• India Inc likely to reorganize: The business of the Indian corporate to be reorganized, as the country switches to the GST regime, which will bring transform unorganized players to organized by bringing them into the tax net.
• GDP &;;; government finances: In the short-term, GDP growth is unlikely to receive a booster as the adoption of a brand new indirect tax structure will entail a meaningful disruption. From the Government finance perspective, Central Government finances will be adversely affected in FY18 as it will have to pay compensation to supplier-state.
• Effect on working capital requirements: GST will increase working capital requirements across major manufacturing sectors on account of tax liability on inter-state tock transfer&;;rsquo;. Accordingly, businesses will not be able to claim their tax credits until the shipped goods are sold. To reiterate, stock-transfers in the current regime do not attract any tax even during an inter-state transfer.
• Boost for the organized sector: With the need for registration and filing of returns in multiple states, compliance costs are likely to go up. An overall tax compliance is expected to go up. This will also impact some of the smaller entities in SME dominated sectors. Over the long-term this is likely to lead to consolidation and market share gain for the organised sector.
• Strong manufacturing hubs to be compensated: The destination based taxation structure of GST implies that states with manufacturing bases will potentially lose revenue, which will be compensated by the Central Government &;;ndash; about Rs. 50,000 crore in the first year. The key states that will require compensation are Gujarat, Maharashtra, Uttar Pradesh, Tamil Nadu and Haryana. Proceeds from the additional cess on sin goods will constitute the pool from which the states would be compensated for any revenue loss.

Conclusion: The rollout now appears certain on July 1, unless there is any unforeseen development. The government is ready and so is the large businesses coupled with mid-size companies. There is still a month for the rest of the businesses to be prepared and get registered under the new tax regime. GST, being ;;; &;;lsquo;one country, one tax&;;rsquo; format, is expected to give a sharp fillip to economic growth, thanks to lower rates and efficient taxation and, as a result, better compliance. On the overall front, it is a welcome step from the government to make GST the reality soon with the overhang of the implementation of the law coming to the end. This implies, it will also be cheering for the Indian equities as well for the medium to long term perspective.