GST: efficiencies have risen in manufacturing: 

GST: efficiencies have risen in manufacturing: 

Context

• Until recently, the manufacturing sector was burdened with multiple indirect taxes.
• Introduction of GST, in the backdrop of the ‘Make in India’ initiative, does away with multi-layered taxation.

What was the concern?

• State-border check posts, established to scrutinize documents and location-based compliance, adversely impacted the overall production and logistics time, reducing the efficiency of Indian manufacturers.

How GST has come to rescue?

• State – border check-posts have been abolished with the introduction of GST.
• The new tax regime is unifying the Indian market and help smooth the flow of goods within the country.
• Prior to GST, the inter-state sale was subjected to 2% CST without input credit, whereas GST on inter-state supply is available for input credit.

What is there a need to provide input credit?

• Input credit will lead to removal of an extra level of warehousing in the supply chain resulting in cost benefits.
• GST contemplates input credit of tax on supply of goods or services.
• The GST Act provides a list of services for which input credit is not available. Thus, the system aims to provide seamless input credit.
• This welcome change help business plan well on product pricing and estimating cash flows.
• Anti-Profiteering rules commands that any reduction in the tax rate or the benefit of input tax credit needs to be passed on by way of proportionate price reduction.
• Standing committees, both at the Central and State levels, will examine complaints and refer cases for investigation based on merit.

The setup of the standing committee

• After investigation, the Directorate General of Safeguards will report to the anti-profiteering authority. The authority will review the report before taking a decision.
• The authority, within a period of two years, has powers to debar an assesse from conducting business, to levy penalty, or to enforce refund of proportionate price reduction.

How to achieve seamless input credit?

• Administrative machinery has to ensure that input credit is implemented in letter and spirit.
• The GST Council has to constantly watch developments and give suitable directions to achieving the objective of seamless input credit.
• The Council should also ensure that actions taken by the anti-profiteering committee are genuine and not arbitrary.
• This will boost the confidence of the industry in the GST system and inspire them to concentrate on business development.
• The Council has to take a realistic view in making changes to the tax rate for certain goods and services about which select industries are concerned.