GST and Corporate Finance- A note

Abstract

The Goods and Services Tax (GST) is the most important indirect tax reform in India. It was debated enough over the past sixteen years and yet when it was launched in India, a common criticism was that the present government hurried its implementation. Experts complained that the IT infrastructure was not robust to handle such large volume of data that would get generated in the GST portal. Better beta testing would have avoided initial technical glitches. Perhaps due to pressure from business community and opposition (some claim that impending election in Gujarat did the trick), the government had to recently announce some major changes in the GST rates and also simplified compliance requirements. The major changes include reduction of GST rate for more than 178 items, composite scheme limit increased to INR 15 million, exemption from GST registration for all service providers with turnover up to INR 2 million, pruned by nearly three-fourths the number of items under highest GST rate, halved the composition tax of 1% on turnover of taxable goods, and provided relief to the e-commerce sellers if total turnover is less than INR 2 million. However, marketplace operators and sellers are still not happy with the recent changes in GST rules. One may note the recent announcement by the GST Council would cost the exchequer.