The Centre is aiming at April 1, 2017 to implement GST.
The Goods and Services Bill (GST Bill) is being touted as a game changer for India's economy with widespread positive effects across sectors like manufacturing, e-commerce, which will lead to an uptick in the GDP of the country. However, one likely fallout of the implementation of the Goods and Services Tax might be that the services sector of the country will slow down.
The much-awaited GST Bill was passed in the Rajya Sabha on the government, putting an end to the decade long back and forth on what is deemed the biggest tax reform in India since 1947. The GST Bill, when it is implemented will remove the multiplicity of indirect taxes that plague India's business environment right now, and will help in improving the ease of doing business, the Modi government hopes. While the Centre is aiming for a roll out by its April 1, 2017 deadline, experts say that it is likely to get pushed back to July or October, 2017.
According to a report by Reliance Securities, a GST regime will ensure more FDI inflows, aid GDP growth by 1-2%, give manufacturing a boost by achieving economies of scale, expand the tax base and cut tax evasion ensuring higher revenue, and will benefit customers too.
However, an unlikely fallout of the GST Bill is that it may lead to a slowdown in the services sector. This is because, when the GST is implemented, it will subsume the service tax that is currently in place.
"Service Sector would witness slowdown in growth as the current Service Tax rate will increase from 15% to 18%," the Reliance Securities report said.
The services sector contributes about 52% to India's GDP.
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