After months and months of speculation, at midnight tonight, the GST (Goods and Services Tax) will be rolled out in a massive, nation-wide exercise. This is the present Indian government’s mandate to bring the country under ‘One Nation, One Tax.’ But, with so many details still unclear regarding the fate of different sectors in the goods and services industries, we at Inc42 thought it is imperative to decode the tax rollout for our readers. In a Facebook AMA conducted today, we caught up with tax and legal expert V. Lakshmikumaran, founder and Managing Partner at Lakshmikumaran & Sridharan to get the lowdown on what the GST will bring to startups.
At the outset, Lakshmikumaran (with more than 3 decades of experience in tax and legal compliances) said, “We have been living for the past 60 years with a chaotic tax structure on goods and services. We had ultra soft levies like Excise Tax, Service Tax, VAT etc. And each of them has a cascading effect on goods. The tax structure has become totally opaque, with regard to the quantum being paid on commodities. Exporters and industries have especially suffered. So, this ‘One Tax, One Nation’ is a step forward in the right direction.”
According to him, the sectors which will be most impacted are logistics, manufacturing, and consumer electronics. With logistics, the state-specific taxes for moving goods from one state to another will be eradicated, especially once the E-way Bill is introduced. On the manufacturing front, warehouses need not be in different states to escape state-levied taxes, bringing down operations costs, which will benefit the customer. As far as consumer electronics are concerned, both the above sectors as well as input services and goods to manufacture consumer electronics will have significantly lower taxes, thus ensuring cheaper electronics. In totality, these services will lead to the reduction in overall taxation due to GST.