It was Friday Midnight, every Indian had their televisions on and eyes glued to the screen as India gets its new taxation system – GST (Goods and Services Tax). Well, GST aptly personifies the phrase of ‘one nation, one tax’.
Now, the goods and services will fall under 5 categories – 0%, 5%, 12%, 18%, and 27%. Mr. Arun Jaitley (Indian Finance Minister) said this new tax system will bring down the inflation, tax avoidance will not be easy, and most importantly it will benefit nation’s GDP. Yes, this tax system will certainly affect the lives of a common Indian man. So, allow me to discuss 7 things about GST you should know.
What is GST?
GST (Goods and Services Tax) is a new type of indirect tax and this help in replacing other taxes such as – octroi, service tax, state sales tax, and sales tax levied under the current multi-tax system. With the help of this tax, there will be less compliance of burdens for the businesses, widening the tax coverage, and transparency in transactions.
Before GST, each state used to impose a different tax. Owing to this, each state was seen as a different market by the businesses. With each state having different taxes, it was certainly a laborious task to move goods from one state to another. GST will eliminate this differentiation and will help in creating a unified market. This will help ease out the movement of goods and services across different states and also cut down the cost of businesses.
Who will be benefitted by GST?
If you have businesses Pan-India, you will have a lesser cost of compliance since you will only have to pay one tax. Retail businesses will have the maximum benefit as there will be increased movements of goods, improvement in the supply chain, and better logistics. Retailers across the sectors will also be benefitted by GST on improved consumption as the tax on the essential and basic items will be reduced.
What are the challenges to GST?
New businesses will come under the tax net as per the new taxation system. Now, this means that the existing administration and tax bureaucracy will have to go through an increasing number of tax assesses. Yes, this will be a great challenge, especially as each state’s tax department and central government will have to work together as one.
Who will be affected by GST?
All non-compliant businesses will be mainly affected by GST. Retail businesses or suppliers failing to abide by GST will have a tough time surviving in the market. This is because no customer will show interest in associating himself/herself with the non-compliant since the whole system is transparent. The purchase tax credits will be permitted only when it matches the returns of the supplier.
What are the exceptions to GST?
Jet fuel, crude oil, petroleum, natural gas, and diesel are not included on GST. All these items have been placed under 0% category, but these items will continue to be taxed as per the old tax system. In addition, alcohol has also been exempted from GST, the decision for its inclusion will be taken by GST Council sometime later.
How does it affect Indian economy?
- It will help in building a business-friendly environment, thus by increasing tax-GDP ratio.
- By covering all goods and services, it will not only widen the tax regime but help make transparent.
- It will also include indirect taxes at both center and state level.
- GST will offer some relief to the manufacturing sector from cascading effects of taxes, thus making significant improvements in the cost-competitiveness of goods and services.
- The prices of goods & services will fall, eventually increasing the consumption.
- As per a prediction, an overall economic growth of 2% is expected after the implementation of GST.
Will it make doing business easier?
GST will eliminate multiple taxes, compliances, and interfaces into one sole regime. This will benefit all those who have their own business. You can file your tax easily, and everything will be transparent as well. Eventually, this will help in generating better revenue for the government and also for the people.
Hi, my name is Ankita Dixit, I am 27 and I am a professional writer. I started writing from young age and most of my writing skills and knowledge are self taught. Currently, I am working as a professional writer at Paisa.co. I have write on various topics including travel, motivation, finance, technology, credit cards, insurance and entrepreneurship etc.