As the world reels under economic crisis, the Indian economy stands as a ray of hope. The Indian economy has seen profound changes recently, all thanks to the Central Government’s initiatives like Make in India, Digital India campaign and more. The projected growth targets by the Central Government reflect positivity. Enterprises like the campaigns for Digital India and Make in India only strengthen it.
GST in India is one such significant initiatives which continue to pull this economy towards growth with its transformative changes in the country’s complicated tax structure and has changed the complete indirect tax structure of the country.
Since it brought into effect in July 2017, the benefits of GST already made far-reaching changes in the pre-existing taxation system in this country. The GST bill was introduced to establish integrity within the Indian economy. It charges at both Central as well as State levels of the Indian Government. The statement came as a reform.
Benefits Of GST
There are many advantages of the GST which has made it widely accepted. For example, taxes such as VAT, Octroi, etc. were merged under one system to restructure the entire framework of indirect tax policy. Means to say Its introduction replaced many pre-existing indirect taxes like VAT, Excise, CST, and more, thus, unifying taxation structure.
Now, taxpayers have to pay only one consolidated tax. The effort was to avoid double taxation.
Its rollout has been a significant success for the nation’s economy, considering the many benefits of GST on businesses as well as consumers. It also simplified the compliance requirements of people in the industry at every stage of a supply chain. Now, all they need to do is to maintain input and output of GST and its due dates of payments, instead of all indirect taxes.
Before moving on to its advantages elaborately, let’s first understand GST better.
What Is GST?
Goods and Services Tax is a unified tax scheme the government levies on all goods and services. As for India, GST has unified the country’s complicated tax structure.
Unlike taxes like VAT and service tax that was levied on goods and services separately, GST is a conventional tax system for both. While the GST rate in India reaches as high as 28% for a few products and services, the ultimate impact of its introduction is bringing down the overall price.
Also, goods and services attract different rates as listed by the Central Government. The different GST rates in India are 5%, 12%, 18% and 28% respectively.
Top 3 Benefits Of GST In The Indian Economy:
Replacement Of Multiple Indirect Taxes
Before GST was introduced in India, the indirect tax structure was complicated. A single product or service attracted various taxes depending on the implication rules. For example, if you manufacture a product, you were liable for Excise Duty. The same product, when sold, also carried a VAT and CST. However, GST has replaced them with one unified tax. We can say that the tax filing process is easy and transparent now with just one GST registration.
Reduction In Compliance
If a product or service attracts five different taxes, a person has to maintain compliance requirements for all of them separately. Earlier, manufacturers, wholesalers and retailers had to do it at every stage of a supply chain.
With GST’s introduction, the compliance requirements became simpler. It is among the top GST benefits, streamlining India’s tax policy and structure.
Special Mention For Central And State Governments
The manufacturing and service/retail segments observe a split of burden owing to GST. As a result, exports get enhanced, thus, increasing income. Moreover, it also creates a healthy base for new employment opportunities, which, in return, improves the growth rate in economic and industrial sectors.
No Cascading Effects
The older indirect tax system of India carried a significant flaw in its structure that led to the cascading effect. It drove to a levy of tax on tax. Let’s understand it with an example.
The manufacturing cost of Product X is Rs. 100, and Excise Duty and VAT are 10% and 5% respectively. The manufacturer sells it at cost + Excise Duty, i.e., Rs. 110 to the wholesaler. He, in turn, sells it for cost + VAT, i.e., 110 + 5.5 = 115.50.
Calculate the GST
Here, VAT calculates on the total amount, which includes tax. This is the cascading effect. In GST, this effect eliminates because, at every step, one can take an input tax credit for GST paid to the previous seller. Thus, it also reduces the total price a consumer pays. To ease the process, there is multiple online GST calculator introduced in the market. One may use these direct on online sites.
These benefits of GST help lower the burden on ordinary people, which makes them more likely to increase their consumption. It leads to an overall increase in demand, thus, increasing its supply too. Ultimately, it results in channelisation of resources through manufacture and propels the Indian economy towards growth.
Another significant benefit includes the elimination of cascading effects, i.e., incurring tax on tax. With GST applicable on all stages, like manufacture, sale or resale, a seller can take the input tax credit and pass on the burden of charge to the next in the chain. It significantly reduces the total cost a consumer pays, thus, making them purchase more.
Amongst the many GST benefits, it has made taxation procedure simple and easy as it is conducted online. The process might be complicated for middle-class consumers, but as proposed by the government, GST shall have 80% positive impact on the Indian GDP by 2020.
GST In The Modern Age
In the modern age, where GST surrounds everyday sales, businesses can make the most of these benefits of GST by increasing their manufactured output. So, get your business registered under this unified taxation scheme if it qualifies to enjoy these various benefits.
It means a high overall demand, which also increases the supply. The ultimate benefactor of all this is the country’s economy, which expects to see growth through improved resource utilisation and manufacture.
Although in its initial stage with just two years of the rollout, everything about Goods and Services Tax is already intensifying the sales of products and services. If you are eligible under this scheme, register your business and enjoy the benefits of GST.