What Is GST, How Will It Change India And What Are Its Advantages
Goods and Services Tax (GST) is a one tax that replaces all the other indirect taxes on goods and services that we pay to both central and state government. The main intention behind implementing GST bill is to make the Indian market single, cooperative and undivided in order to make the economy stronger and powerful.
What is GST?
GST is an indirect tax that unites all the taxes that are charged on goods and services on manufacture, sale and consumption of goods and services under a single domain at the national level. GST is a stabilized tax that is based on a uniform rate of tax fixed for both good and services and can be paid at the final point of consumption. Through tax credit mechanism, the tax is collected on value-added goods and services.
The proposed model of GST
Proposed by Empowered Committee, the dual GST system is said to be implemented in India in two parts.
- State Goods and Services Tax (SGST)
- Central Goods and Services Tax (CGST)
Both SGST and CGST will be imposed on the taxable value of a transaction. All the good and services except few will be brought into the GST. The GST system will incorporate Central excise duty, additional excise duty, services tax, State VAT entertainment tax etc under one banner. The GST rate will be around 14 to 16 percent.
GST Bill Status
After much speculation and all finally the GST bill has been passed. The bill was passed with the concept of ‘one nation and one tax’. All the parties have given a green single to the bill and the bill has been passed successfully. Finance Minister Arun Jaitley has introduced the bill and the bill got introduced finally. The Rajya Sabha passed the constitutional amendment by two-thirds majority and all parties excep AIADMK gave their support.
Advantages of GST
Lifts up the burden
GST as soon as it comes into action will lift up the burden from your shoulders as it will replace 17 indirect tax levies and compliance costs will fall.
There will be a raise in Revenue
Input tax credit will encourage suppliers to pay taxes and evasion is set to drop. States and Center will have dual oversight and the number of tax exempt goods will decline. With the implementation of GST, India will gain $15 billion a year. The rise is related to more exporting, creating more employment opportunities.
Now the market is divided states wise and the costs will push up to 20 to 30 percent.
Costs of logistics and inventory will see fall
Logistics and inventory costs will witness fall.
There are many capital goods that have no input tax credit. Full input tax credit will be issued under GST which means 12 to 14% drop in the cost of capital goods. There will be 6% rise in capital goods investment.
Make in India
The Make in India will get a boost. Manufacturing will get more competitive as GST will reduce the tax and inter-state tax, high logistics and fragmented market.
Perks for individuals and companies due to GST
Once the GST is implemented, both Centre and State will collect the tax at the time of sale. The tax will only focus on the manufacturing cost. Individuals will be benefited a lot by this as the costs of daily purchasing will come down and lower prices will ultimately lead to higher consumption, which in turn implies to increase in production, which will lead to the growth of the companies.
Backward states will get benefited
The present 2% inter-state levy will just allow the production to just flow within the state, but under the GST national market, this can be scattered creating opportunities for others.
Manufactured goods will become cheaper
The manufactured goods will be available at much cheaper costs and so there will be a raise in purchase and increase in production.
HSBC assumes an 80 basis point rise in GDP growth over three to five years on implementation of GST.
No restrictions to ecommerce sites
Few ecommerce sites will only ship to particulars states and reject offering shipping to other states. This will all end when GST comes into action.
However, goods like petroleum, alcohol and tobacco are excluded from the GST.