One Tax Multiple Benefits
Hello… it is good to see you here. In this series on GST, we have attempted to present different aspects of the new tax regime. As you must have read or heard, that GST is a single tax which has multiple benefits for various stakeholders. What are these beenfits exactly? Read on, and find out more…
Uniformity and Transparency in Indirect Taxes Administration
Taxpayers will have minimal physical interface with the tax officials in the GST regime. All compliances by the taxpayer will be through the common GST portal. There will be simplified and automated procedures for various processes such as registration, returns, refunds and tax payments. All processes of applying for registration, filing returns, payment of taxes and filing of refund claims shall be done online through the GST portal. The input tax credits will be verified online, encouraging electronic trail of transactions. Electronic matching of input tax credits all-across India will make the process more accountable. This will lead to an environment of enhanced self-compliance, uniformity and transparency.
Minimization of Cascading effect of Indirect Taxes
As the entire supply chain will be taxed at every stage by a single tax with credit of taxes paid at the previous stage being available for set off at the next stage of supply, the cascading of taxes will be minimized under GST. The tax invoice will show the value and tax component of supply separately. This will help the industry to take credit of taxes paid on the inputs, and will also help the government to verify the correctness of taxes paid and the consumer to know the exact the tax component in the goods or services received. This will make transactions transparent to all.
Benefits to Industry
GST aims to make India a common market with uniform tax rates and procedures. GST will help remove the tax distortions and barriers between States, thus paving the way for an integrated economy at the national level. By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of cascading; increase competitiveness and improve liquidity of the businesses. This will also help Indian manufacturers to set up factories at optimal locations to minimise costs and achive ‘economies of scale’.
Harmonization of laws, procedures and rates of tax will make compliance easier and simple. There would be common exemption, common definitions, common forms/ formats, common advance rulings, common interface through GST portal resulting in efficiencies and synergies across the board. This will also remove multiple taxing of same transactions and inter-state disputes like the ones on entry taxes and e-commerce taxations existing today. All this will also help in reduction in compliance costs, alleviate the need for multiple record keeping for a variety of taxes leading to lesser investment of resources and manpower in maintaining records. Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services along with timelines for every activity will lend greater certainty to taxation system.
Further, all imported goods will be charged with integrated tax (IGST) which is equal to Central GST + State GST. This will not only bring parity with taxation on local products, but also provide protection to the domestic industry.
Boost to the Export Sector
Under the GST regime, exports will be zero rated in entirety unlike the present system where refund of total incidence of taxes do not take place due to fragmented nature of indirect taxes between the Centre and the States. All taxes paid on the goods and services exported or on the inputs or input services used in the supply of such export goods and services will be refunded. The principle of ‘no export taxes’ will be implemented in full. This will boost Indian exports in the international market thereby improve the balance of payments position. Exporters with clean track record will be rewarded by getting refund of 90% of their claims arising on account of exports, within seven days resulting in ease of cash flow.
Benefit to Government
GST is expected to bring buoyancy to the Government Revenue by widening the tax base and improving the taxpayer compliance. GST is likely to improve India’s ranking in the Ease of Doing Business Index and is estimated to increase the GDP growth by 1.5 to 2%.
GST will give a major boost to the ‘Make in India’ initiative of the Government of India by making goods and services produced in India competitive in the national and international markets.
Benefit to Consumer
Elimination of cascading effect of tax is expected to lead to reduction in overall prices of goods and services. There will be a uniform tax structure for individual products across the country. Thus the price of goods will be uniform across the country. The economic value and tax value of goods and services can be easily identified in the supply chain. This will keep consumers better informed and help them make right choices. GST will lead to simplification of the existing indirect tax system. Compliances will be online and there will be a shift from paper based to paper less compliances under GST. Simplicity and rationalization of taxation system and creation of a nationwide market is bound to increase competition and benefit consumer by providing wider choice at reasonable prices.
Special Benefits for Small Taxpayers
Small tax payers have been provided special benefits in GST with regard to compliance levels as well as payment of tax. A small taxpayer having aggregate turnover of Rs. 20 lakhs (10 lakhs for North-Eastern States, Uttarakhand and Himachal Pradesh) need not register and need not pay GST. Those below the threshold limits may voluntarily register and pay the requisite GST and avail the benefit of input tax credit. Even the ones above threshold limits (with an aggregate turnover of less than Rs.75 lakhs in the previous year (Rs.50 lakhs in N-E States and Himachal Pradesh) may opt for composition levy and pay lower tax of only 1% on the state turnover (2% in case of manufactures and 5% for Restaurants). Further, they would also enjoy the benefits of reduced compliance by way of quarterly return as against monthly returns for others.
Making India an Economic Union
There will be one tax for the entire nation in place of the multitude of taxes that exist today. Goods and services will move seamlessly across state borders without any hindrance. Rate of taxes will be uniform across the country. There would a nationwide level playing field for the supply of goods and services. GST will transform India into an Economic Union, create a national market and strengthen the sense of nationhood and unity.
See, how much simpler life will be for manufacturers, suppliers and consumers under GST. If you have any queries about GST, or this article, please write in to us here.
Click here to know more about GST in an interactive video