GST: Boon or Bane
Background of GST
The GST (Goods and Services Tax) Act was passed in the Lok Sabha on 29th March, 2017, and came into effect from 1st July, 2017. GST is a single uniform indirect tax which was introduced to replace Central and State indirect taxes such as VAT, CENVAT, and others. GST applies on all types of businesses. Right now there are so many indirect taxes are applied in India.
Taxes levied and collected by the Centre:
- Central Excise duty
- Additional Duties of Customs (commonly known as CVD)
- Special Additional Duty of Customs (SAD)
- Service Tax
Taxes levied and collected by the State:
- State VAT
- Central Sales Tax
- Entertainment and Amusement Tax (except when levied by the local bodies)
- Taxes on lotteries, betting and gambling
GST is Bane right now
- Increased Taxes:- Yes most of the things are going to get costly. That bike you were saving for will get costly, that Laptop you were saving for that will cost you more and the list goes on. All the countries where GST is implemented bump in inflation has been observed. In other countries inflation was controlled after sometime,but not sure if it will be true for India as well.
- Filing so many returns is trouble: Under GST businessmen have to file 4 returns. It is very cumbersome process for everyone. So much pressure on the companies. It is a big trouble. GST portal is down. No one is aware of correct rules and businesses are heavily impacted due to this.
- Old stock:- Well sellers are already facing a lot of trouble here's another one the old inventory which was bought with old tax rates need to be sold as once the GST is applied the tax rates will be different for purchase & sale.
- Thousands of tax staff will also need to be trained and complex new IT systems adopted. There is no GST tax filing training has been provided for Businessmen. So maintain this new system training is missing.
GST is Boon
- Cascading of taxes eliminated by the GST: GST is the tax which removes cascading of taxes. GST only applies on Value addition on the goods or services.Currently if a manufacturer sell his product to a wholesaler,some tax is paid. Say manufacturer pay 10% on his product of rupees 100. wholesaler add more taxes on amount of rupees 110 so he is actually putting tax on tax and also adding tax on rupees 10 which is tax itself. So this is cascading of the taxes. GST is only applicable on value addition so not applicable for tax on tax. In GST manufacturer pay 10% tax. post that wholesaler need not to pay tax on 110 rs. he just has to pay tax on the value addition. So if he sells product to retailer for 150 so he has to pay tax on 40 rs.
- Elimination of buerocrates bribes and corruption currently businesses has to deal with different tax windows. GST will eliminate the need of dealing with so many departments to run the business. Now Businessmen have to only talk to one department.
- Relief to business from the corruption at state borders: Rolling a truck of vegetables into Gujarat, requires a bribe of 500 rupees to 2,000 rupees even with your papers in order. Seized vehicles. Bribes. Moving goods across Indian states isnít exactly easy and thatís a major barrier to economic growth.
- Same tax for whole country. Right now businessmen exist in different states have to pay different taxes due to different states. Business man of state A manufacture same product and get tax benefit earn more profit. but same product is costly in other states that makes the business(manufacturing) costlier in state B. So all industries are developing in some particular part of countries. With GST whole nation will come under same tax so businesses will grow equally.
- Due to same issue companies operate smaller factories and warehouses to take advantage of tax breaks offered by various states, as well as to avoid transporting goods over too many borders. All states act like different countries. GST will eliminate this problem as well.
- One of the biggest goals of the GST is to widen the tax net in an economy where more than 90 percent of workers are employed informally. Companies will need to be in the tax system and prove they paid taxes to claim a credit against their costs. Pressure to comply will increase along the line and the black economy should shrink.
- GST is destination based tax so the tax will be collected and passed to state which is consuming the product. So if a product is manufactured in state A and final destination of tax is state B. So tax would be finally collected at state B and tax benefit will be passed to state B. Tax credit will passed to whole system. It will help to collect only single tax and it is uniform throughout the country.
- India is obviously a huge and complex country in which governmentsí ability successfully to implement major reforms is limited
- Any company wishing to sell its wares across India currently faces at least 17 different state and federal taxes. With the introduction of the long-awaited national goods-and-services tax, that number is about to drop to just one.
- Goods and Services Tax (GST) will be a game changer for Kerala, with initial figures suggesting a jump in tax revenue following the state's migration to the new tax regime. SGST revenue, the tax levied by the state for intra-state supply of goods and services, for July, the first month after GST implementation, stands at Rs 800 crore when filing of returns ended on August 25.
All are agree there is a need to change the Indian tax system. GST is way forward for this change. Though it is true that GST implementation is causing various troubles. Government should make the process as easy as possible for filing the GST tax returns. Though it is true India is very big country so it is not easy to implement anything new. Government has taken certain risky by implementing it and it is a commendable job. Government need to monitor the situation and need to make any corrections if required.
Contributed by: Studyfreak