Goods and Services Tax in India- Impact on Financial Services Sector
With reference to the Indian Indirect Tax perspective, the most awaited year of the decade i.e. year 2017 is within a touching distance marking the implementation of a complete indirect tax revolution viz GST. After almost three decades from the time MODVAT was first introduced in India back in 1986 followed by gradual steps taken by government to facilitate seamless flow of CENVAT across excise and service tax that followed by the negative list regime under service tax, the need of the hour viz. GST looks on track for April 2017 implementation going by the strong intent of the present government. Though the industry preparedness for GST is far from being satisfactory, what needs to be seen is the impact (either positive or negative) that GST would bring in once implemented and how quickly the industry adapts to the changed scenario. Since the financial sector in our country is highly regulated,a company engaged in rendering financial service in India has to comply with several regulations under different laws apart from compliance under indirect tax laws. Tax base of the Indian Financial Service sector is already substantially exploited by the government. Such wide tax base brings along with it several complications with respect to coverage of subject transaction under the bracket of tax levy. Now, with the government promising that GST would usher in economic growth leading to a spurt in economic activity, let us analyse the impact that GST might have on the financial sector with focus on certain financial services and whether it would resolve the complications prevailing under the present legislation.