Introducing the concept of value added tax, GST is one of the major tax reforms that India has ever seen. The GST bill in India was passed and came into effect from 01-07-2017 which comprises an attempt to simplify the taxation structure of the nation by abolishing many indirect taxes and replacing them with a single tax.
Let’s Understand About Goods And Service Tax (GST)
Goods and Services Tax (GST) is a type of indirect tax which is imposed on sale of goods and providing of services. It is an end-destination tax that is structured in multiple stages and is integrated in nature replacing several proposed taxes as well as underlying taxes which were levied by both the union as well as the state governments including excise duty, service tax, VAT, etc. GST is structured into five tax slabs: These percentages include 0%, 5%, 12%, 18%, and 28%. obtaining GST registration services is crucial for compliance and effective management of GST obligations, as outlined in the GST bill in India.
GST And Its Relevance/ Importance Of GST In India
Regarding the importance of GST in India, one can point to the fact that this tax serves as a key facilitator for optimizing the Indian tax system. The Indian taxation system before the implementation of GST was conceptualised as multiple layers of taxation existing at the Centre as well as in the states. This in turn led to what came to be known as the ‘layering of taxes’, that is, the consumers used to pay taxes on taxes and this led to unreasonable prices. GST removed this chain effect, as it provided a unified structure for taxes, which in turn has lessened the taxes on products and services.
Main Features of GST
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Applicable On supply side
GST was aimed at the ‘supply’ of goods or services while the earlier concept was based on manufacture of goods or sale of goods or provision of services.
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Destination based Taxation:
The proposed taxation structure is consumption based and locations specific while the present taxation structure is just the opposite.
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Dual GST:
It is a dual GST structure with both the Central and State Governments collecting tax on the same base. The GST that is proposed to be charged by the Central Government is known as the Central GST or CGST and that proposed to be charged by the State Governments is known as the State GST or SGST.
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GST rates to be mutually decided:
Levied at rates discoverable with the mutual consensus of the Centre and the States, CGST, SGST & IGST. The rates are notified on the recommendation of the GST Council Rate of Tax as mentioned above is charged on the recommended rates of the GST Council.
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Multiple Rates:
At the beginning of GST implementation in India we had four different tax slabs distinguished as 5%, 12%, 16% and 28%. The GST council works out the schedule or the items that would fall under these multiple slabs.
Advantages of GST
For the Government
- Create a unified common market -: Which will assist in the building up of a single integrated common national market for India. It will also help increase the levels of Foreign Direct Investment and act as a booster to the “Make in India” initiative.
- Streamline Taxation -: This may be achieved by harmonization of laws, procedures, and rates of tax at between the Centre and States and across States.
- Boost taxes Compliance -: There is a general increase in the environment for compliance operations due to the demand that all returns be submitted online and that input credit be validated online. This results in a greater amount of paper trail production on all transactions occurring at every stage of the supply chain.
For Overall Economy
- Bring about certainty -: The measures such as registration of taxpayers, refund of taxes, similar formats of tax return, the common tax base, the classification of goods and services will enhance certainty in the taxation system.
- Reduce corruption -: Increased application of IT will minimize approaches to the use of the human interface between the taxpayer and the tax administration minimizing corruption.
- Boost secondary sector -: It will encourage exports and manufacturing hence increasing employment increasing the GDP of the nation with productive employment resulting in qualitative economic growth.
For Consumers
- Transparent prices -: Final selling price of goods is likely to be more transparent because of ease of passing input tax credit from the manufacturer to retailer/service provider.
- Price reduction -: A drop in prices of various produced commodities and goods in the long run because of a lesser burden of cascading taxes.
- Poverty eradication -: In a way that creates more employment and more money to spend.
Conclusion
Thus, the GST bill in India is a positive step toward transitioning the Indian economy from an informal to a formal economy. We should, therefore, learn from other global economies that have employed the system before us to counter the looming difficulties.
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