India's GST may face initial teething issues but will boost the economy

THE first major test for India's biggest tax reform since its independence, the goods and services tax (GST), will come next week when tax payers start to use the online GST network (GSTN) portal to file returns and claims. GSTN officially went online on Monday, and it remains to be seen if the portal is robust enough to handle the expected surge in traffic. It also remains to be seen how corporate tax payers, of which many are small businesses whose owners are not technology savvy, adapt to the new system of online tax reporting.

Many studies have indicated that GST, which supercedes various state-level taxes, will add one to two percentage points to India's gross domestic product (GDP) due to easier flow of goods. The GST Bill's process from conceptualisation to law has been a long and torturous decade-long journey through the country's Parliament since it required a Constitutional amendment. It was of little surprise then that once passed, Prime Minister Narendra Modi unveiled GST in a dramatic fashion from the central hall of the Parliament building on midnight of June 30-July 1.

Three weeks into its implementation, there have been mixed signals with regard to the success or otherwise of the measure. There has been a surge in foreign portfolio investment (FPI) in the first three weeks of July as investors seem to be encouraged by the relatively smooth roll-out of GST thus far. A recent study found that 88 per cent of Indian CEOs feel confident about GST. Logistic companies, which ferry goods in trucks throughout India, reckon that they would save as much as 20 per cent since their trucks would no longer have to stop for hours on end at state borders for consignment inspection and payment of various state-level taxes.