From July 1, 2017 the Government of India has begun implementation of the Goods and Service Tax or what is commonly termed as GST, in short. It is an indirect tax that will be levied on all goods and services apart from those exempted by the GST law. GST meaning Goods and Services Tax, is therefore a tax that is being applied on both physical products like cars, TV, bread, clothes and so on, and on services like mobile network, banking, air travel, movies and so on.
Since we are in the business of providing goods and services we ought to know what GST will do. The GST taxation laws will put an end to earlier multiple taxes like excise, CST, VAT, service tax that were levied on different products, starting from the source of manufacturing, till they reach the end consumer.
The implementation of the amended taxation system will stop distinguishing a good from a service and will tax both equally. GST will be dual tax regime where the only two components will be Central GST and State GST. Likewise the total amount of GST for any goods or service will be distributed in both State and Central exchequers.
With the introduction of the GST taxation, India has constitutionally amended the Goods and Services Tax bill and thereby simplified the tax structure. This step appears to be in the right direction as it will certainly make the country business-friendly and that now opens the doors to greater economic prosperity in the years to come.
One thing is for sure GST will do away with the multiple taxes and costs involved that will ensure a simple, transparent and unified tax system for a seamless, border-less market cutting across India. With GST having been designed to be undertaken electronically there is going to be no manual filing of returns. Again this ensures greater transparency and accountability while at the same time making the process simpler.
Consumers will be benefitted in a number of ways with the new system of paying taxes. For one there is going to be uniformity in the mode of tax payment and also will lead to the elimination of multiple excise, CST, VAT, service tax calculations. Uniform taxing system will do away with any confusion by determining what is a good and what is a service.
Secondly it will eliminate double taxation which means the consumer pays tax on an item, on which already government has collected tax from the manufacturer under some other head. Thirdly, this in turn will open the door for transparent pricing. At present hidden taxes actually push up the taxes on majority of goods to almost over 30%. But now with GST having been rolled out this percentage is presumed to be much lower, although the precise number has not been finalized yet.
To sum up here are a few benefits of GST:
- Unified indirect tax system.
- Simplified tax regime.
- Reduction in manufacturing cost.
- Removing the cascading effect of taxes i.e. tax on tax.
- Replacing a number of other taxes like VAT, CST, Service tax, CAD, SAD, Excise, Entry tax, purchase tax etc.
- Working under a less complex tax system.
It is to be noted here that since this is a destination based tax, hence the place where goods are consumed and services provided has to be evidently specified. And since its been just a couple of days since the new tax has been introduced, one has to wait and watch its effects. It is being estimate that GST will have a positive impact in the country and in time will play a major role in determining its actual impact.
Yes businesses will decidedly benefit by finding it much simpler to understand and pay taxes. For the government the benefit will be that more people will pay taxes if they are simpler, thereby increasing government revenue. In the final count our economy would grow faster. Seeing the after effects of GST in several other countries, time will tell us what will be the impact in India.