GST Boosts Up NRI Investment in Real Economy of India

Indian economy is taking a new turn. GST or Goods and Services Tax bill is rolled out on 1^st July, 2017. Transition is on with this proposed comprehensive indirect tax. From now onwards, a uniform tax would be levied on manufacture, sale and consumption of goods and services at national level. With the enforcement of this rule, all other indirect taxes like VAT, Service Tax and so on would not put separate burden of such variant taxes.

The biggies of corporate world and NRI entrepreneurs have gone gaga over this unified tax structure. Why are the corporate giants and Indian diaspora abroad applauding this transformation?  Catch the reasons below:     

Benefits

1. Transparency: Before implementation of uniform tax application, the tax structure was opaque. State and central government used to levy various taxes on the same goods or services. But GST changed the entire game of taxation. Tax rate on particular goods or services would be identical on both levels.

For example, GST on Jio telecom service would be 18 percent rather than 15 percent on state as well as national level.

This step would bring transparency in tax structure. Thereby, the biggies would love to capitalize on it. If talking about India entrepreneurs’ diaspora living abroad, this tax incentivizes real estate and gold buyers. Foreign investment is likely to up via foreign direct investment due to transparency.             

2. Simplification of the tax regime: Before circulation of this bill, the government did its homework pretty well to tap all sources of money flow. By enforcing demonetization, it won half of the battle. And put the money flow under surveillance of its tax authority. Want to know ‘how’?

It has made linking of bank accounts with Aadhaar card mandatory. And for tax payers, PAN card is also a key to put tax in its tunnel. And if the resident or non-resident is likely to make transactions via mobile e-banking, the tax authority would be able to track every money flow. For example, an expat earns INR 2.5 lakh via manufacturing goods & deposits in NRO account. Since his bank account would be linked with Aadhaar, the tax authority of India would easily scan the money flow. Later, it can simply impose GST tax accordingly.

3. Supply chain efficiency: Most of the NRIs tend to bring many goods to distribute or sale. And most of the transactions in present scenario are done through e-banking or online. Consequently, the tax department goes alert as it taps this e-mode of transactions always. As a result, it levies tax.

Earlier, the expats used to evade taxes due to cash transactions. Even, they did not want to dispose their hard-earned money in several state and central government taxes. But this unified structure of tax has delivered them relief to grab bonus in NRI services. They don’t have to go through the pain of paying several taxes. Resultantly, they get motivated to supply more with higher efficiency.   

4. Better penetration of expats in real-estate market: Many expats have been living with a dream of owning a house in India. But investment in real estate was an expensive deal for them. But with the implementation of GST, the real estate would be taxed with 12 percent only. Moreover, it includes excise duty, value added tax and service tax (that was levied 4.5 percent separately before GST) but excludes stamp duty & registration charges.

This uniform tax enforcement has cut on the risk of skyrocketing price of well-furnished property.

5. Encouragement to pay tax to expats: Many emigrants generate capital income that exceeds INR 2 lakh. But they evaded tax that is mandatory to pay off in India. They frequently play with tricks to escape the burden of tax.

Let’s say, an NRI’s capital gain surpasses INR 2 lakh (which is the tax-free limit) in a financial year. To blind the tax authority, he adjusted his money in to two bank accounts, i.e. in SBI account and PNB account.  While doing so he forgot that it’s a malicious attempt. Income tax department keeps its hawk-eyes on every transaction & its source.  

But now, GST would be identical. So, they would be boosted up to pay tax. 

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