Let’s demystify this tax and understand it better.
You must have heard a lot about the new tax regime GST i.e. Goods and Services Tax, which is being touted to be one of the biggest taxation reform in India. But what is GST and how is it going to impact you? Let’s demystify this tax and understand it better.
What is the GST?
Goods and Services Tax i.e. GST is a comprehensive tax which will be levied on manufacturing, sale and consumption of goods and services at a national level and is said to be one of the biggest taxation reforms in India. In simple words, it is a tax levied at every stage whenever a consumer buys goods or services. This way of taxation is already in force in 150 countries. It will convert the whole country into a unified market and replace all the indirect taxes currently in place with the one single tax system.
What is the need of introducing GST?
Currently in India, there are various taxes being managed differently by Central and state government like Central excise duty, service tax and customs duties at the Central level and VAT (value-added tax), entertainment tax, luxury tax or lottery taxes at state level. Everything will get replaced by one single point of taxation i.e. GST.
It would facilitate more seamless movement across the nation and will reduce the overall transactional cost of running the business and thereby also reducing the compliance of following multiple tax rules and obligations. This is highly relevant today, looking at the growth that India's economy can achieve. It may also reduce corruption and bring more efficiency in running businesses.
Will it help you?
As mentioned above, we have a very complex tax structure system in India which makes it very difficult for any business as they are expected to pay and fulfill a lot of legal obligations. GST will help and simplify the process to a great extent and thereby reduce the overall operating costs, which ultimately will be passed on to the consumers. Since it is also going to increase India’s GDP and income overall, consumers can expect more indirect benefit after its roll out.
How is it going to help India earn more revenue?
GST will increase the overall GDP (Gross domestic product) of India and will increase its total revenue collections. It will also facilitate more exports and has the potential of boosting employment, apart from inviting more foreign investors.
What will be the impact of GST on businesses?
Let’s understand this with an example. Say you have a manufacturing unit in Mumbai for producing boxes, for which you have to pay excise duty to the Central Government and also need to file a separate tax return. The moment you supply your product to other retailers, you are liable to pay VAT and file its return. Also, the moment you expand to other markets, say Madhya Pradesh, you will be liable to pay Central Sales Tax because it involves multiple states.
The entire process involves multiple transactions and compliances, which will be removed, or I would say come down, to a much lower level after the introduction of GST. This will be a big help to all businesses - big or small - in bringing down their compliances.
Let’s hope that this new tax regime will simplify our lives, which is right now surrounded by a complex web of taxes.
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