Why India’s new GST is a warning of bigger things to come24 August, 2017 2:44 pm
In India, arguably more than anywhere else in the world, you’re likely to see an elephant in the room. But this one is not the majestic howdah-bearing animal; it’s much bigger than that. It’s the move towards a digital economy, and if it hasn’t already arrived, it’s coming to a business near you very soon…
In India, the elephant in the room is bigger than, well, an elephant in a room – and it will certainly have a significant effect on the economy of the whole of the country.
We’re talking about the shift towards a digital economy, which will be no mean feat in a country which has been used to paying nine in ten of its workers in cash.
The first real shock came in early November 2016, with the sudden withdrawal of the 500 and 1,000 rupee notes. At a stroke, the move stripped more than 80% of its currency out of circulation, in some areas paralysing normal trade which is based on hard cash changing hands.
Was the move designed to flush out hoarded cash? It’s hard to see how effective that would be in the longer term. We innocently wonder if hoards would just be in 100 Rupee notes instead of the larger ones…
More likely is the presence of the pachyderm on the premises; making it the first step in a digital revolution to get India’s business trading online, where transactions become visible to the taxman.
Hot on its heels are changes to the Payments and Wages Acts, under which it will become mandatory for salary payments to be cashless.
The arrival of GST
Setting aside the difficulties that will cause for those living a hand-to-mouth existence, the vision of a cashless Indian economy is likely to roll on. Fast-forward six months into 2017, and we arrive at the new Goods and Services Tax, a further step towards doing business digitally. Coming in three ‘flavours’ of State, Central and Integrated, it’s intended to be an indirect tax on the supply of goods and services (the clue’s in the name).
Its introduction has replaced a dozen other taxes, and although it looks like three taxes, they‘re all different elements of the same thing. When goods are made and sold in the same state, State GST and Central GST apply, with both the centre and the State taking a share. Just how much depends on the goods or services being supplied.
If goods are made in one state, or imported, and sold in another, then Integrated GST is due, and that’s collected by the Centre.
GST help from Solo Expenses
The Indian has grown an average of 6.1% from 1951 until today – a hugely successful rate of growth, albeit not constant, rising as high as 11.4% and plunging to -5.2% at points of the same period.
That relentless march of growth has happened, we’d suggest, because of the entrepreneurial spirit deep within the Indian psyche. At Solo Expenses, we have been part of it, developing our expense management software since 2003. In its latest incarnation we have made it the perfect support to calculating and recording your GST payments. We have built in an automatic tax calculator which works in the background, and we have made it possible for business people to set up their own categories under which to record spending.
Once the data is in our handy smartphone app, it’s easy to collate it and export it to accounting packages or, perhaps better still, to your accountant, which can then do the GST filing on your behalf.
And wouldn’t that be a great weight off your mind, and a step towards embracing the digital economy? It’s going to come. With our help, you can be so much better prepared for it when it does.
How to get started with Solo Expenses
Our cloud-based expense management software can be downloaded with a simple click and answers to a couple of question. You can do it almost more quickly than it takes to tell. The cost is very low, so that’ll be a pleasant surprise – and we’ve bundled the download into a series of YouTube videos explaining about GST. They’re completely free, and you can watch Episode 1 (there are six so far) here.