ADVANTAGES OF GST IN INDIA
The Goods and Services Tax was introduced with the primary objective of boosting India’s economy. Besides simplifying the indirect taxation system, GST has helped in clearing away the hidden costs on commodities/services, thus benefitting the end users. Some major advantages of GST in India are as follows:
The GST system has facilitated in creating a transparent system with easier classification of products & services. However, the taxation under GST is based upon the concept of supply rather than on this classification. That is, if a transaction does not fall under the realm of supply, it will not be taxable under GST. Moreover, litigation, arising from cases whether a particular item or activity is goods or service, is not likely to occur.
The implementation of the GST system has paved way for simpler procedures and compliances as well as aided in easy monitoring and tracking of defaults or non-compliances. Furthermore, there had been multiple legal compliances under different legislatures. But now, taxpayers have got things easier as legal norms only under one statue need to be adhered to. GST is supported by the Goods and Service Tax Network (GSTN), a fully integrated tax platform, to help manage all aspects of GST.
BENEFITS FOR SME’S AND START-UPS
SMEs and start-ups in India have a host of benefits awaiting them under the GST system which includes:
- Ease of starting business by lower compliances. Companies that have business in different states & territories were earlier required to comply with multiple laws. However, the centralised registration under GST has eased the process of setting up new businesses while also reducing the costs.
- Minimised tax burden on new businesses. Earlier, it was mandatory for companies with turnover more than Rs 5 lakhs to register themselves under VAT. However, the limit under GST has now been extended to Rs 20 lakhs. This has provided relief to over 60 percent of the SMEs.
- Efficient logistics leading to efficiency in delivery & cost savings. The entry tax for goods manufactured and sold in any part of India has been done away with under GST. Thus, it has paved way for smother transportation of goods by minimising waiting time on check posts. A direct result of this would be significant savings on transportation costs.
- Uniformity in the taxation process. Through a simple online mechanism, small businesses find it extremely easy to file their tax returns every quarter.
Becoming at par with the international tax standards, the introduction of the GST system has ensured reduction in overall costs of production, thereby making Indian products much more competitive in the global market. Furthermore, inflation is likely to remain under control under the GST regime.
BENEFIT TO THE GOVERNMENT
The GST system has ensured better revenue generation for the government as the cost of tax collection has reduced. And, the government is seeing an increase in taxpayer registration. Also, with the systematic rules under GST, malpractices like corruption and sales without receipts are kept under check.
Under the GST administration, the final tax would be paid by the consumer for the goods and services purchased. However, there would be an input tax credit structure in place to ensure that there is no slumping of taxes. GST is levied only on the value of the good or service.
MULTIPLE LAYERS OF TAXATION
One of the advantages of GST is that it integrated different tax lines such as Central Excise, Service Tax, Sales Tax, Luxury Tax, Special Additional Duty of Customs, etc. into one consolidated tax. It prevents multiple tax layers imposed on goods and services.
RESOURCEFUL ADMINISTRATION BY GOVERNMENT
Previously, the management of indirect taxes was a complicated task for the Government. However, under the GST establishment, the integrated tax rate, simple input of tax credit mechanism and a merged GST Network, where information is available, and administration of resources are well-organised and straightforward for the Government.
ENHANCED PRODUCTIVITY OF LOGISTICS
The restriction on inter statement movement of goods has reduced. Earlier logistic companies had to maintain multiple warehouses across the country to avoid state entry taxed on interstate movements.
CREATION OF A COMMON NATIONAL MARKET
GST gave a boost to India’s tax to Gross Domestic Product ratio that aids in promoting economic efficiency and sustainable long – term growth. It led to a uniform tax law among different sectors concerning indirect taxes. It facilitates in eliminating economic distortion and forms a common national market.
EASE OF DOING BUSINESS
With the implementation of GST, the difficulties in indirect tax compliance have been reduced. Earlier companies faced significant problems concerning registration of VAT, excise customs, dealing with tax authorities, etc. The benefits of GST has aided companies to carry out their business with ease.
REGULATION OF THE UNORGANIZED SECTOR UNDER GST
It has created provisions to bring unregulated and unorganised sectors such as the textile and construction industries to name a few under regulation with continuous accountability.
REDUCTION OF LITIGATION
GST aids in reducing litigation as it establishes clarity towards the jurisdiction of taxation between the Central and State Governments.GST provides a smooth assessment of tax.
TACKLING CORRUPTION AND TAX LEAKAGES
With the GST online network portal, the taxpayer can directly register, file returns and make payments of the taxes without having to interact with tax authorities. A mechanism has been devised to match the invoices of the supplier and buyer. This will not only keep a check on tax frauds and evasion but also bring in more businesses into the formal economy.