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GST and its Implications on The Masses

Posted by Taxadviser on May 2nd, 2020

GST stands for Goods and Services Tax, which is a revised method of taxation introduced in India after demonization in July 2017. It is a single Indirect Tax which replaced all the other Indirect Taxes. Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based A tax that is levied on every value addition. The Goods and Services Tax is divided into five slabs - 0%, 5%, 12%, 18% and 28%. There are three exceptions this tax, petroleum products, electricity, and alcoholic beverages which are taxed individually by the state governments, as the previous tax system.

India has a dual GST model; thus, the taxation is levied by both the Central and State governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government.

The various advantages of GST help the consumer, common man, and government simultaneously. With the introduction the Goods and Services Tax the market of the entire country has been unified successfully. Pre-GST, the statutory tax rate for goods was around 26.5%, post-GST majority of goods are in the 18% bracket. It consolidated 17 Centre and State levies such as excise duty, service tax, VAT, Central Sales Tax, etc. Another GST benefit is that now the prices of goods are uniform across states which benefits the Indian economy as a whole, in contrast to the pre-GST era where the prices varied from state to state which only benefitted the states individually.

GST proved advantageous for the consumers, by solving the issue of cascading taxes, which is the increasing addition of taxes at each stage of production till it reached the consumer, leading to a more inflation-prone market price. Merits of the GST include the travel time in interstate movement during the chain of supply, which dropped by 20%, because of the disbanding of interstate check posts. Introduction of GST has made tracking of taxes very easy since it works on a computerized system, the consumer knows the exact amount of tax being levied on each product clearly in the receipt.

GST eased the taxation burden of small and upcoming businesses. Since the turnover limits for GST is higher it exempts small scale traders and service providers from paying GST. The Composition Scheme introduced under GST reduced taxes and the tax compliances. Business owners registered under this scheme pay a fixed tax percentage of their turnover and only need to file one quarterly return. Service providers with an annual turnover of Rs. 50 Lakhs pay a GST of 6% instead of the initial 18%. Another helpful advantage of GST for businesses is that be it GST registration or GST return filing the business owner can do all the necessary procedures online, in contrast to the earlier tax regime wherein the business owner had to be registered individually for all the various Indirect Taxes.

An easy GST example is that if Kabir owned a motorcycle manufacturing unit in Maharashtra and had to deliver his goods to a consumer in Andhra Pradesh, he would have to pay the tax Maharashtra and the Centre levied on motorcycles and on an entry in Andhra Pradesh would have to pay Entry Tax. Now in present times, Kabir only has to pay one tax; GST, as it has consolidated Centre and State levies such as excise duty, service tax, VAT, Central Sales Tax Etc.

Advantages of GST does not only extend to the traders and consumers, but the government also stands to benefit from it. The transparent and accountable market formed by GST promotes Indian products internationally and attracts foreign investments. GST helped the government broaden the tax base while simultaneously increasing tax compliance. It enhances the import, export and investment sector, thus enhancing economic activity which in turn also generates more employment opportunities.

Registration under the GST regime is the fundamental requirement as it leads to the identification of the business or service. It involves receiving a number from the authorities for the purpose of tax collection on behalf of the government. A company can only claim credit for paying the tax on their supply if they are registered. GST registration is necessary if the business requires inter-state trade and the revenue is greater than Rs. 20 Lakhs.

A GST registration will be done simply at the web GST registration portal. Business owners will fill a form on the GST portal and submit the required documents for registration. It is a criminal offense if these businesses do operations while not registering for GST and serious penalties are levied for non-registration.


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Also See: Services Tax, Gst Registration, Various Advantages, State Governments, Tax, Registration, Gst

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