In this article, we will talk about India’s biggest transforming decision, the indirect taxation system- “Goods and Services Tax” (GST). GST is the buzz word today, but yet most of the people are not fully aware of it. There are lots of myth about GST. So we just thought of presenting GST in simplified way.
GST bill was passed in Loksabha on 6th May, 2015, And GST is Applicable from 1st July 2017.
GST or Goods and Services Tax is an indirect value added tax, a consolidation of large number of Central and State taxes into a single tax, allowing set-off of prior-stage taxes. For a consumer, the benefit would be in terms of a reduction in the overall tax burden on goods and services, which is currently estimated at 25%-30%. Establishment of GST also make our products more competitive in the domestic and international markets. Current statistics show the instantly actuation economic growth.
Advantages of GST for businesses-
1. Easy to start a New Business:
Before starting any new business you need to have VAT (value-added tax) registered from the sales tax department of India. A business operating in multiple states has to face a lot of issues regarding the different procedures, taxes and fees in each state according to their names. Its quite complicated to maintain multiple taxes. GST converts all taxes into one tax, so that the centralised registration system is given new possibilities to expand their business in different states. And the process is also very simple and convenient to everyone, this is the biggest benefit of GST for new businesses.
2. Higher Exemption for New Start-ups and Small Businesses:
In a simple word, any business with a turnover of more than 5 lakh (INR) has to get VAT registration (different in different states) and pay VAT. But after GST, the tax limit is increased up-to Rs 10 lakh. And for businesses with turnover between Rs 10 and 50 lakh (it’s optional) will be taxed at a lower rate. It is called the composition scheme. This bring relief from tax burdens to newly established businesses.
3. Easy Taxation System (Integration of Multiple Taxes in GST):
Before GST, goods and products are taxed under the VAT regime implemented by the State Government (According to the states) and services. And the services are taxed under the service tax regime implements by Central government. Under the GST regime, many of the taxes in existence today involved and made in one tax. The following taxes are proposed to be involve under the GST:
The biggest benefit of GST is reduced human mediation that will be brought about by the online taxation experience of GST. After GST, no worry about interacting with numerous tax department officers for carrying out compliance procedures. All the mediation procedures under GST – Different forms, registration, payments, refunds and returns – will now be carried out through online portals only, which has the following advantages:
Registration – timely receipt of certificate of registration at any time
Payment – more transparency and reduction in mediation costs (No more partail behaviour)
Refund – faster process and enhanced liquidity
Returns – automatic and hassle-free input tax credit and tax liability adjustment
5. Relief for Business in Both Sales and Services tax:
GST won’t make the difference between services and sales tax, and in this way the expense calculation will be done on aggregate amount. Business like hotels and restaurants, which had to pay both taxes: sales tax and service tax are free from these taxes and only aggregate amount will be applicable on sales and service.
6. Decrease in Transportation Cost Across the Country:
- This is the measure changes shows after GST tax on transportation
- more efficient cross-state transportation
- less paperwork for road transporters
- bringing down logistics costs
Before GST tax, all 29 states on India collect taxes at different rates on goods that move across their borders. Due to this, tax on freight is collected multiple times. Also, there are long delays at interstate tollbooths owing to review by state authorities who examine and apply the relevant taxes and other excise. Transportation vehicles delays are an average 5-7 hours at interstate tolls. After GST tax, transport sector seeks to replace around 15 states and federal taxes and tariffs for a single tax unit. Which makes transportation more convenient and time saver.
GST tax is a very meaningful step for indirect tax. By consolidating a large number of central and state taxes into a single tax, GST is much easing double taxation and make taxation overall easy for the every sector. GST has also made Indian products competitive in the domestic and international markets. Last but not the least, we want to say one thing: SABKA SATH SABKA VIKAS