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GST – One Nation One Tax

“To drive a car across India,
you don’t need state wise driving licenses

then why separate license (registrations)
for doing business in different states?

That’s the answer by introduction of GST
– Goods and Service Tax
– One Nation One Tax.”

With the introduction of GST Bill, it’s going to be the biggest reform for Indian economy, a move towards ease of doing business. India will have simplified tax structure and it’s going to be One Nation One Tax. It would make the country decidedly business-friendly, which would open the doors to better economic prosperity in the years to come.

Introduction

GST will do away with the multiple taxes and costs involved and will help consolidate the process of indirect taxation to ensure a transparent, simplified, and unified tax regime for a single border less market across India. It’s a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

The Benefits

For business and industry

Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

For Central and State Governments

Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an inbuilt mechanism in the design of GST that would incentivize tax compliance by traders.

Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

Benefits to Startups

  • All it will need is One GST registration, and you are free to do business across nation. Many Startups / SMEs where restricting themselves in doing their business with in their states or buying goods from other states. This is no longer a barrier with GST.
  • Higher exemptions to new comers. As of now of you would need VAT registration and payment to be done, if your annual turnover is more than 5 Lacs. With GST, this limit has been increased to 10 Lacs. Further, businesses having turnover between 10 to 50 Lacs, will be taxed at lower rate. This will reduce tax burden for new comers.
  • With simplified GST requirements, Startups will spend less time and energy managing indirect taxes. No filing or reporting requirements at every state level will make life much easier.
  • Startups involved in sales and services both, for example a software product company selling software licenses as well as implementation services will have to charge VAT and Service tax separately at different rates. With GST, it will be single tax at the same rate.
  • Interstate goods movement will become cheaper and faster as there are no interstate borders check posts and tax issues. This can bring logistics costs down.
  • Major boost and benefits to eCommerce and aggregators as buyers and sellers can come on such platforms from anywhere and do business transactions across the country. This brings opportunities for them to reach out to untapped market across India.

Benefits to Indian Economy

GST will boost the GDP. By eliminating the cascading effect of multiple Central and State taxes, GST would reduce the cost of doing business and increase profitability, which in turn, would attract investments, increase in business, push in the tax revenue of government and ultimately help GDP growth.

Conclusion

It’s always difficult to bring, adopt and apply any small or big time changes in life. GST will have some or the other glitches from technology, adoption, compliances, political and others point of view which will be addressed over a period of time. Initially, some of the industry verticals may have negative impact also but on a longer run it should be win-win for government, businesses and end consumers.