GST is a revolutionary step taken by The Government of India to make Indian economy stronger than before.
On 1st July government of India announced a new way of tax payment which is GST which will make the process of tax collection very simple as compared to the previous tax system.
As GST is a newly introduced tax system in India many people still are unaware of What is GST? is it good for Businesses? is it good for common man?
At the simplest level, GST reduces the number of instances where taxes need to be paid thus reducing the possibility of manipulation on the part of tax authorities and is assumed to be a much transparent mode of administering taxes.
It will alleviate the burden of cascading taxes for individuals. It is also expected to boost revenue collection in certain states and to reduce the prices of goods.
India is a collective economy where each state has its own set of rules for them. This makes the growth of the country slow, causes difficulties to the businesses and higher possibilities of tax evasion and corruption.
To make the tax payment process simpler and create a win-win environment for both, government as well as businesses, and to reduce the corruption, GST bill is introduced in India which is very important.
So let’s see why GST Act is good for India, the businesses in India and the common man of India.
Major Benefits to the Economy As A Whole:
- The scenario of differing tax rates in different states obstructs cooperative federalism.
GST will bring uniformity and also deplete the cascading consequence of these taxes by giving input tax credit, having a comprehensive tax inclusion with minimum exceptions which will in turn help the Industry to benefit from the proposed common procedures and claim credit for the tax paid.
- GST is expected to increase the mobilization of resources available for property alleviation and development of the country as pointed out by the Prime Minister, Narendra Modi.
This will take place in two ways: (a) directly the resources available to the poorer states will increase substantially; (b) indirectly as the tax base becomes more buoyant.
- The common base and common rates across goods and services and very similar rates across Centre and States will result in effective administration and increase compliance while also ensuring the better management of taxes collected in the State.
Also, there is a provision to maintain the requisite fiscal autonomy to the States with the power to levy additional excise taxes on certain “sin” goods like, tobacco, alcohol, etc.
- The complicated tax-levy system categorized by distortions between States and Centre divides the country into separate economic zones, with the help of GST this will get transformed into one common national market.
This impedes the Make in India process which will get a boost through GST as it is making tax compliance easier removing ambiguity and at the same time, as GST will be applied on imports, domestic manufacturing would be encouraged.
- Tax Governance will get a positive boost through this regime, mainly, through the feature of input tax credit.
To claim input tax credit, each dealer has an incentive to request documentation from the dealer behind him in the tax chain which will ensure tax compliance.[perfectpullquote align=”full” cite=”” link=”” color=”” class=”” size=””]Also Read :- E-Commerce business – 10 things you should keep in mind [/perfectpullquote]
Also this would further require producers to buy materials from registered dealers and therefore will bring in more and more vendors in the taxation net.
Furthermore, the dual monitoring structure of the GST by both Centre and State will make tax evasion more prone to detection.
- There will be reduction in prices of goods as taxes would now be exempted from the production cost and at the same time it will put better goods and services within the reach of a larger number of the populace and this will raise the living standards of the country.
- Successful implementation of GST would give a strong signal to the foreign investors about India’s increased creditworthiness, lesser compliance and procedural costs in the taxation sphere and remove the complexities faced by the foreign investors who were reluctant to invest in consonance with the existence of virtual economic zones throughout the country.
. GST is a simple tax system. Now, the taxpayer won’t be confused about what type of taxes he/she should pay.
There will be only one tax, which is GST. The agenda of the government behind introducing GST itself is “One Nation, One Tax”.
GST Act is going to ease the stress of taxes from Indian businesses and manufacturers. They now have to pay lower taxes, and it will surely increase the scope of a better business environment and flexibility.
India is economically growing with a lightning speed. Developed countries like Sweden, Denmark, Germany, Switzerland, Japan – have moved to a common GST (Goods and Service Tax) to provide one common window for tax collection.
So now GST has become a standard tax for global business and India being progressing towards the development had to embrace a uniform, sophisticated tax system which is GST.
GST will surely increase the number of taxpayers, which will in turn help to reduce the tax rates as more people are paying taxes.
Removal of the Cascading Tax Effect is another advantage of GST. In simple words “cascading tax effect” means a tax on tax.
In previous tax system, tax was levied on goods at each stage of the production process up to the point of being sold to the final consumer.
A cascade tax is a type of turnover tax with each successive transfer being taxed inclusive of any previous cascade taxes being levied.
This creates a burden of taxes on the end user, hence in GST, there will be no cascading tax.
As every coin has two sides, even GST has its own set of drawbacks and disadvantages.[perfectpullquote align=”full” cite=”” link=”” color=”” class=”” size=””]Also Read :- 9 things that defines you an Entrepreneur [/perfectpullquote]
The fundamental problem involved is the decision of a revenue-neutral rate for the GST that will be acceptable to all those involved and also whether there will be a single rate or two rates at state and Central level.
The federal nature of the country also accounts for its own share of complications and delays. For the Centre to be able to impose tax at the retail level and for states to be able to tax services will require constitutional amendments, which will further need to be passed by the Parliament and state legislatures.
Though GST has its own flaws and controversies, it will surely help to boost up our economy but it’s a long-run process, which will take time.
Only the time will tell us whether GST is beneficial for India or not.
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