How GST in India will give a major boost to ‘Make in India’ initiative

Last updated on January 6, 2018

Ever since the Indian government has undertaken a new initiative, Make in India, it has taken multifarious steps to promote the campaign. Not only has it asked various global enterprises to invest in India, but has also encouraged domestic companies to expand their footprints so as to make India an investment hub. Among all the actions that the government has taken so far, the introduction of GST (Goods and Services tax) in the country is surely the most pivotal one. If the opinions of industry veterans are to be believed, then GST would give a major boost to the Government of India’s Make in India initiative. Read on to know how!

The ‘Make in India’ initiative was undertaken with the prime intention of making all the goods produced or provided in India more competitive in the international market. Recently, the government has sent several delegates to countries that are prospective investors with the prime intention of convincing them to invest in India. Other than this, the government itself has formulated several policies that can ensure a myriad of benefits to global businesses that opt for investment in India. All these actions have definitely helped India emerge as a favorable investment hub, but those actions were not more than enough to ensure wholehearted success to the campaign. However, the introduction of GST is most likely going to change the current scenario radically. The new GST regulations are going to bring parity in overall taxation in India on all sorts of domestic and imported products, and this would ensure scrupulous protection to the domestic industry. Majorly, there are two ways in which GST can boost the ‘Make in India’ initiative, and those are briefly explained herein.

Zero rated exports under GST regime

Owing to fragmented nature of taxation system in India between Centre and States, exporters had to face varied complications as it comes to claiming and/or receiving refund of taxes in the pre GST era. Not only did it hamper the overall revenues of exporters, but also forced them to look out for another method to evade hefty amount of taxes. Conclusively, this had a drastic impact on government’s revenues as well as businesses’ compliance rating.  However, as per proposed GST rate in India, exports are entirely zero rated. This means that exporters can claim Input Tax Credit on input supplies even though they do not have to pay tax on final export supplies. This would consequently boost Indian exports, which can ensure grand success to ‘Make in India’ initiative with utmost competence.

Replacement of CVD with IGST

So far, all sorts of imported goods attract Countervailing Duty (CVD), and once GST is in force, it will be replaced by Integrated Goods and Services Tax (IGST). We all know that IGST is nothing but the sum total of Central GST (CGST) and State GST (SGST), and therefore, it is quite clear that the new taxation system will foster clarity and parity in taxation of each and every imported and/or domestic product. As per experts, this is going to change the way businesses in India perform any commercial activity. Not only will the comprehensive GST regulations ensure that domestic players are given special attention, but it will even foster a competitive business environment in India that pays equal importance to Indian as well as foreign companies. Additionally, the new regulations related to taxation on imported goods are going to encourage several multinational companies to set up their production houses in India.

Conclusion:  It can be deduced that proposed GST rate in India is favoring ‘Make in India’ initiative, and it can help the Government of India attract several major global investors.  Thus, GST in India will give a major boost to ‘Make in India’ initiative.