The Goods and service tax (GST) is passed by Rajya Sabha recently. The GST bill which was pending since so many years will be a reality soon. The GST will be a game changer for the Indian economy as it will abolish many indirect taxes and bring all of them in the single window.
What is Goods Service Tax (GST)?
GST or Goods and Service Tax is common tax system proposed by the government. As the name suggest it is a common tax for Goods and Services. In simple words today we are paying multiple taxes such as excise duty, custom duty, value added tax, octroi, service tax etc. Once GST is implemented all these taxes will be replaced by a single tax which is called as GST. GST rate is expected to be 18-20% which is lesser than tax burden of indirect taxes.
The GST is expected to give following benefits.
10 benefits of Goods Service Tax (GST)
Elimination of Multiple Taxes
The biggest benefit of GST is an elimination of multiple indirect taxes. All taxes that currently exist will not be in picture. This means current taxes like excise, octroi, sales tax, CENVAT, Service tax, turnover tax etc will not be applicable and all that will fall under common tax called as GST.
Saving more Money
For a common man, GST applicability means the elimination of double charging in the system. This will reduce the price of goods and services & help common man for saving more money.
It is expected that price of FMCG products, small cars, cinema tickets, electrical wires etc is expected to reduce.
Ease of business
GST will bring one country one tax concept. This will prevent unhealthy competition among states. It will be beneficial to do interstate business.
Easy Tax Filing and Documentation
For a businessman, GST will be a boon. No multiple taxes means compliance and documentation will be easy. Return filing, tax payment, and refund process will easy and hassle free.
Cascading Effect reduction
GST will be applicable at all stages from manufacturing to consumption. GST will provide tax credit benefit at every stage in chain. Today at every stage margin is added and tax is paid on whole amount, in GST you will have tax credit benefit and tax will be paid on margin amount only. It will reduce cascading effect of tax thereby reducing cost of product.
As GST will reduce cost of product it is expected that demand of product will increase and to meet the demand, supply has to go up. The requirement of more supply will be addressed by only increasing employment.
Increase in GDP
As demand will grow naturally production will grow and hence it will increase gross domestic product. It is estimated that GDP will grow by 1-2% due to GST.
Reduction in Tax Evasion
GST is a single tax which will include various taxes, making the system efficient with very little chances of corruption and Tax Evasion.
More Competitive Product
As GST will address cascading effect of tax, inter-state tax, high logistics cost it will make manufacturing more competitive. This will bring advantage to businessman and consumer.
Increase in Revenue
GST will replace all 17 indirect taxes with single tax. Increase in product demand will ultimately increase tax revenue for state and central government.
Goods and service tax is a boon for the Indian economy and the common man. It is a welcome step taken by the government.