When it comes to the Goods and Services Tax (GST), people have a lot of questions in their mind. The concept is not that clear in the minds of the common man. They generally have questions like, What is GST in India?, How is it going to operate and what is its impact on various sectors?
Read on to know what GST in India is and how this new tax regime functions.
GST is a form of indirect tax introduced by the government to normalize and simplify the tax system in the country. It is a common tax system which brings all goods and services under the purview of a single tax system.
GST ensures that the tax is paid on the value addition of the goods and the taxation does not have any cascading effects.
Benefits associated with GST
GST in India, as seen today provides multiple benefits to the business and common people. Some of these benefits have been categorized below:
Business and industry
1. The adherence to the compliance is simple now because of the simplified tax laws and the process of filing. The common tax brackets introduced and online mediums for registration and filing of returns makes the job easier.
2. Uniformity in the tax brackets, which make the taxation simpler and easy to understand.
3. GST in India deflates the cascading tax effect, which means there is no tax on tax. This is in the interest of the business enterprises. This would reduce the hidden cost in the business.
4. The reduction in the hidden or transaction cost would improve the competitiveness in the marketplace. There would be more transparency in the transactions.
5. A common tax, which is sales tax for the manufacturers and exporters, would reduce the costs, thereby giving them competitive viability in the international markets.
6. GST does not have any direct impact on the imports. However, GST brings E-commerce business enterprise under the purview of the tax regime. It is mandatory for E-commerce business to obtain registration.
Central and State Government
1. Central and State Government will not have a tough time in collecting the tax as it was earlier. The new system clears off the multiple taxes, thus making it simpler for the authorities to collect the tax.
2. The online system of registering and filing taxes will close the loopholes for tax evasion.
3. The costs involved in collection of taxes would reduce, thus providing higher efficiency for the central and state tax
Benefits for common consumer
1. There are less complex and common tax brackets for all. Multiple items of daily use are less taxed under the new tax system. Cost of goods and services is expected to go down because of the expected reduction in the handling costs and no cascading taxes. Also, the taxes would be levied on value additions.
2. The overall burden of tax on the common man will come down gradually because of the efficient tax system. It would help reduce the tax leakages resulting in gradual reduction tax brackets.
The above are some factors analyzed in the current light. It would be interesting to note how the new tax regime shapes up in the near future.
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