The country witnessed a momentous occasion after the Rajya Sabha today passed the historic Goods and Services Tax Constitutional Amendment Bill.

The country witnessed a momentous occasion after the Rajya Sabha today passed the historic Goods and Services Tax Constitutional Amendment Bill.



The tax, upon rollout, will replace almost all state and central indirect taxes and levies such as excise, service tax, sales tax, VAT and octroi.



The most vocal proponent of the bill, Adi Godrej, believes the tax's rollout will add at least 1.5-2 percent to the country's growth rate.



GST's benefits are many: it will widen the tax base by easing compliances, boost ease of doing business, reduce the overall tax rate in the economy and thus help investment and boost growth. Being value-added in nature, it will also eliminate the economically-negative practice of levying tax on tax. Further, by doing away by differential tax structures in various states, GST will for the first time create a national market and boost inter-state trade.



"The biggest positives from the GST is that it will lower the tax rate and make tax evasion very difficult," Godrej said.



The general expectation is that the GST rate would be closer to 18 percent. Currently, manufacturing is tax at around 30 percent while services are at around 14 percent.



Further, the GST will also level the playing field between the unorganized and organized sector, as the former could get away from paying taxes and enjoyed a tax advantage.



"The industry will benefit tremendously," said Godrej. "Overall, consumption, production and investment, all will get a boost."



Maruti Suzuki Chairman RC Bhargava said that while the Bill has been passed, effective implementation of the tax will be equally important.



After all, the minutae of the Bill -- the standard GST rate, which items will qualify for the standard, concession and luxury/sin tax rates -- will all be thrashed out later the GST Council comprising the state and central officials.



M&M's Pawan Goenka said that the transition period around the time GST is rolled out will be important.



"The transition will be fairly complex. GST's success will depend on the complexity of the documentation processes. The model law as it stands needs finetuning," he said.



The tax's rollout will, however, give a fillip to credit growth, Yes Bank chief Rana Kapoor said. "This is the second take-off of the economy. It will rebuild private sector confidence in investments. and unleash several multipliers of growth."



Kapoor, who said GDP growth could hit double digits post GST rollout, added that logistics and transporation sectors will gain the most.



"Post the strong monsoon, this is icing on the cake," he said.