GST Benefits and Impact on Indian Economy
Goods and Services Tax (GST) is an undertaking by the Indian government to transform indirect taxation and allow free flow of goods and services. India is projected to play an essential and ever increasing role in the world economy, and GST is going to help drive that.
Benefits of GST to the Indian Economy
- Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise
- Less tax compliance and a simplified tax policy compared to the current tax structure
- Removal of cascading effect of taxes i.e. removes tax on tax
- Reduction of manufacturing costs due to the lower burden of taxes on the manufacturing sector. Hence prices of consumer goods will be likely to come down
- Lower the burden on the common man, i.e. public, will have to shed less money to buy the same costly products earlier
- Increased demand and consumption of goods
- Increased demand will lead to increase in supply. Hence, this will ultimately lead to a rise in the production of goods
- Control of black money circulation as the system normally followed by traders and shopkeepers will be put to a mandatory check
- Boost to the Indian economy in the long run
What is India GST?
Primary Objective behind GST
- To eliminate Indirect Tax issues
- To remove Cascading Tax effects
- To increase the number of tax payers
- To entertain Consumption-based Tax administration instead of Manufacturing
- To bring out a buoyancy in Govt. Revenue
- To diminish Tax evasion and Corruption
Types of GST
1. Central Goods and Services Tax (CGST)
2. State Goods and Services Tax (SGST)
3. Integrated Goods and Services Tax (IGST)
GST Rates and Slabs in India
5% Tax Slab
12% GST Slab
18% GST Slab
28% GST Slab
How will GST impact the Indian Economy?
- Simplification of the tax structure: Reduces tax burden on producers and fosters growth through more production. The current taxation structure, pumped with myriad tax clauses, prevents manufacturers from producing to their optimum capacity and retards growth. GST will take care of this problem by providing tax credit to the manufacturers.
- Enhanced pan India operations: Different tax barriers, such as check posts and toll plazas, lead to wastage of unpreserved items being transported. This penalty transforms into major costs due to the higher needs of buffer stock and warehousing costs. A single taxation system will eliminate this roadblock.
- Transparency in GST system: There will be more transparency in the system as the customers will know exactly how much taxes they are being charged and on what base.
- Increased revenues: GST will add to government revenues by extending the tax base.
- Fostering production: GST will provide credit for the taxes paid by producers in the goods or services chain. This is expected to encourage producers to buy raw material from different registered dealers and is hoped to bring in more vendors and suppliers under taxation purview.
- Increase in Exports: GST will remove the custom duties applicable to exports. The nation's competitiveness in foreign markets will increase on account of lower costs of the transaction.
- SME support: Under the Composition Scheme introduced by GST, the small and medium-sized enterprises(SME's) can now register. According to their annual turnover, they can pay taxes through this scheme.
A Brighter Economy with GST
Be GST Ready with Deskera
Get Inbuilt HSN & SAC Codes For Goods and Services
Support for Special Economic Zones
Easily Handle Reverse Charge in Sales Transactions
Inbuilt Compliance for Composition Schemes
- 1% - For Traders and Manufacturers
- 2% - For Manufacturers: GSTIN has lowered the rate for manufacturers to 1%
- 5% - For Restaurant Sector
- 6% - For Suppliers of Services or Mixed Suppliers)
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- The primary reason behind the GST implementation is to bring about uniformity in the country’s tax system
- There are 5 rates of taxes in GST i.e. 0%, 5%, 12%, 18% and 28%
- After the implementation of GST, sales tax, service tax, customs duty, excise duty, VAT, Octroi tax, etc. will not exist
- GST would ensure smooth credit flow through the supply chain, thus resolving tax cascading inflationary effects
- GST would also open the Indian Economy to FDI through foreign investors who are hesitant to invest in India because of its complicated tax structure
- There is a penalty of 5 years in prison for those who don’t pay GST
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