The Goods and Service Tax, Act 2017 came into force with effect from 1st July 2017. The implementation of GST in India leads to major reforms. The GST has changed the entire structure of indirect taxes with the concept of “One Nation, One Tax”. The country has received several benefits of GST which you all should know. Every sector and person have faced the impact of GST by some or the other way.
Purpose of GST
The main purpose of GST was to eliminate the cascading effect with the motive to make taxation system stronger and transparent. Another main purpose of GST was to reduce evasion of taxes which used to results in reduction in revenue of government. To provide a simplified procedure to suppliers and to create Indian Economy more powerful GST has been implemented in India.
Benefits of GST
Following are the benefits of GST i.e. Goods and Service Tax such as;
1. Elimination of Cascading Effect:
The term ‘cascading’ means ‘tax on tax’. Earlier person used to pay double tax on a single product which used to result in high rate in price of product.
But in GST supplier pays tax at once only on the products supplied by him.
Check out below example to understand this concept easily;
In the above example, Before GST the dealer has imposed tax on the cost as well as excise duty which results in cascading effect i.e. tax on tax and after implementation of GST the tax has been imposed on cost only.
Note: The rates of Excise Duty & VAT are subject to goods & services.
2. Higher Threshold for Registration
Earlier, the threshold limit for registration was less as compare to GST regime.
Earlier, if the turnover of a person exceeds Rs. 5 Lakhs was liable to pay tax under VAT (but this limit of Rs. 5 Lakhs for registration of VAT differs from state to state). In case of service providers, the limit of turnover was Rs. 10 lakhs, if any person exceeds this limit was liable to pay service tax.
But in the GST regime, the threshold limit for registration is Rs 20 Lakhs. This exempts small traders and service providers from registration.
Check out the blog on GST Registration for complete information.
3. Reduced Tax Evasion:
Earlier, due to inappropriate tax laws there was many loopholes to evade taxes and persons used to take undue advantage of it. The evasion of taxes leads to reduction in Government’s Revenue. To get rid out of this GST has undertaken several measures such as;
- Syncing of GST registration and PAN
- Reporting and matching at the invoice level
- Reconciliation of credits
- Generation of e-way bills
- Tracking of movement of goods
3. Composition Scheme:
In GST, one new scheme has been introduced for giving benefits to small traders and service providers i.e. Composition Scheme. The person whose turnover is below Rs. 1.5 crore and below Rs. 75 Lakhs in Notified States can only take benefits of this scheme.
The person registered under this scheme is liable for lesser compliance and lesser tax liabilities.
5. Lesser Compliances:
Earlier, a registered person was liable to pay taxes such as VAT, Service Tax and Excise Duty and he was supposed to comply with all the compliances of all such taxes.
But as of now, In GST, person is supposed to comply with only GST regime due to the concept of “one nation, one tax”.
In total there are 11 returns in GST, out of which 4 are basic returns which are applicable to all taxpayers.
6. Simple and Easy Online Procedure:
The registration process and filing of returns under GST has been made online. Apart from this all the procedures are way easier than earlier tax regime.
Earlier the person was supposed to comply with the provisions of various Acts to get register himself under Service Tax or VAT or excise Duty or etc. hence it was quite lengthy procedure and time consuming at the same time.
But now in GST regime the process of registration and filing of returns is easy. And if person is registered under CGST Act it considered as registration under SGST and IGST Acts.
7. Beneficial to E-Commerce Operators:
Earlier, it was quite tough job for E-commerce Operators to supply goods due to confusing provisions and various documents,
Before GST, if any E-commerce Operator (Eg. Flipkart or Amazon) requires to send goods out of state then it was mandatory to show VAT declaration and also requires to mention registration number on delivery of truck. In case of failure of the same can leads to confiscation of goods.
All these several compliances are removed under GST regime. GST has introduced simplest way and adequate compliances for E-commerce Operator.
8. Improvisation in Logistics
Earlier, the logistics industry in India was liable to maintain multiple warehouses across states to avoid the current CST and state entry taxes on inter-state movement. This results in huge increment of operating cost of industries.
But under GST mechanism, the above mandatory clause has been removed and some measures has been given for smooth functioning in logistics.
Following are the benefits of GST registration to various persons are as follows;
Benefits of GST to Government
· Ease in collecting taxes
· Uniform SGST and IGST rates to reduce tax evasion
· Reduction in compliance cost as no requirement of multiple record keeping
Benefits of GST to Traders
· Reduction in multiplicity of taxes
· Mitigation of cascading/ double taxation
· Development of common national market
· Simpler tax regime-fewer rates and exemptions
Benefits of GST to Consumer
· Easier way of compliance of taxes
· Reduction in prices of goods or services due to elimination of cascading (i.e. tax on tax) effect
· Uniform prices throughout the country
· Transparency in taxation system
The concept of GST has brought many changes in indirect taxation system; without a doubt, GST is the major reform in India after independence. Major reforms always come up with some drawbacks but ultimately there is a positive impact of implementation of GST in India.