Introduction to GST and its Benefits

Goods and Services Tax, or GST, is a single tax that will be levied on the supply of goods and services in India. It has been considered the most significant indirect tax reform since 1947.

The GST was first introduced in 1991 by Dr. Manmohan Singh as the Finance Minister of India. However, only after his second term in office (2004-2014) did this idea begin gaining momentum and was finally implemented on 1st July 2017.

GST is one indirect tax code designed to subsume all other indirect taxes like service tax, excise duty, etc. Under the GST regime, there will be one common goods and services tax rate applicable to all goods and services irrespective of their nature (e.g., food items, garments, etc.). This means that there will be no separate rate for goods or services such as gold jewelry or tobacco products, unlike the current regime under which there are different rates for different items depending upon their nature.

The implementation of GST is expected to have far-reaching implications on almost every facet of the business including taxation, accounting, auditing & reporting requirements, and related compliances which need to be understood by companies before they undertake any investment decision based on their current position or plans.

Benefits of GST?

GST is the common tax that is applicable to all goods and services. It is a single indirect tax for the whole nation. GST will be levied at every stage of production and distribution, from the manufacturer to the consumer. It aims at raising the efficiency of the collection of taxes, reducing the cost of goods and services, preventing tax evasion, and minimizing cascading effects.

Reduces prices of goods and services as there would not be any cascading effect.

The concept of input tax credit under GST would help in reducing the cost of goods sold by businesses and hence prices of goods are expected to fall.

Businesses would be able to claim tax credits on purchases made under goods & services tax (GST). This would reduce their costs as well as increase their competitiveness in domestic and international markets.

No Cascading Taxes for Indirect Taxes

The Goods and Services Tax (GST) is a consumption tax levied on goods and services provided in India. GST is an indirect tax that acts as a substitute for all other taxes levied on the supply of goods or services.

The GST was introduced in India by the Government of India on 1 July 2017, after the passage of the 122nd Constitutional Amendment Bill by both Houses of Parliament. It replaced more than a dozen of state and central level taxes such as Central Excise Duty, Service Tax, and Entertainment Tax, etc., With effect from 1 July 2017, all states except Jammu & Kashmir have enacted their own State GST Acts based on the Central GST Act 2016.

The introduction of GST has done away with cascading effects (taxes on taxes) prevalent in our country due to multiple indirect taxes imposed at different stages of the production or distribution process. Under the old regime, businesses paid multiple taxes at each stage of the production or distribution process thereby resulting in higher prices for consumers.

With no cascading effects, consumers will now pay less tax when they buy goods or services from a business while it will be easier for businesses to comply with one single tax instead of multiple indirect taxes.

Wider Tax Base

Wider Tax Base: With the introduction of GST, the number of taxpayers has increased significantly. This will help generate additional revenue for the government. As per an estimate by Ernst & Young, there will be nearly 3 million new small businesses that have come into the tax net after GST’s introduction.

Ease of Doing Business: Goods and Services Tax Network (GSTN) has simplified registration procedures for businesses so that they can register themselves easily and quickly.

Easier Compliance: GST has brought about uniformity across states in terms of laws and procedures.

Strengthened Anti-profiteering Mechanism: Under GST, a strong anti-profiteering mechanism has been created to ensure that businesses do not take undue advantage of consumers.

More Efficient Supply Chain Management

The implementation of GST has made it easier for businesses to conduct their business within India as it has reduced the complexity and cost involved in conducting business between states and union territories. Businesses are now able to conduct business across states without having to worry about paying additional taxes like VAT, sales tax, or entry tax at each border crossing. This has helped businesses save time and cost while conducting their operations within India.

Easier Compliance

GST is expected to have a positive impact on the economy, increase tax compliance and broaden the tax base. It is also expected to improve India’s business environment by reducing administrative costs for traders and manufacturers.

The GST Council has decided that all supplies of goods and services made in India will be subject to GST. Goods imported into India will attract GST at the point of entry into the country. The Centre and states will share the Central GST (CGST) and State GST (SGST) equally between them. Any unutilized CGST or SGST can be carried over to subsequent accounting years by filing an application before September 30th each year along with proof of utilization.

In addition to this, there will be an Integrated Goods and Services Tax (IGST) levied on inter-state supply of goods and services which would be collected by the Centre instead of states under the current regime. However, IGST would not be applicable to the inter-state supply of petroleum crude, high-speed diesel, natural gas, aviation turbine fuel, or alcoholic liquor for human consumption.

Ease in the Procedure of Doing Business

GST aims to convert India into a single unified market for goods and services by subsuming various taxes like Central Excise Duty (CED), Additional Excise Duty (AED), Service Tax (SST), etc., into one tax called Goods and Service Tax (GST). It will also ensure that there are no cascading effects of taxes on the production or supply of goods and services.

The benefits of GST are:

• Ease in the procedure of doing business
• Reduction in compliance costs for businesses
• Standardization of taxes across states

Conclusion

GST is a tax that is levied on the supply of goods and services. It is a national reform, which will replace a number of state and local taxes with a single tax. This will not only make India one market but also enhance its competitiveness. GST will also make tax compliance easier for businesses by providing a self-policing mechanism under the new regime.

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