ForumIAS announcing GS Foundation Program for UPSC CSE 2025-26 from 10th August. Click Here for more information.
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.