The Goods and Services Tax (GST) expects to lessen the quantity of indirect taxes and bind together the Indian market. Despite the fact that it was actualized halfway in the last budgetary year, it has a lot of defenders and pundits. Here’s a glance at the advantages related to GST.
Some of the key pointers of GST –
- GST Council plays principled tact and the statesmanship appeared by the individuals is without a doubt a key point.
- The new GST system runs under the surveillance of strong technical support and we can assume more GST services to be digitalized in a couple of months.
- GST is a boon to Micro, Small & Medium businesses. MSMEs are now less dependent on tax experts when compared to the earlier pattern, due to a simplified return filing system in place.
Advantages of GST-
1. Minimal of the cascading effect of tax – GST is a comprehensive indirect tax that was intended to bring indirect taxation under one umbrella. All the more significantly, it will kill the falling impact of duty that was apparent earlier. Cascading charge impact can be best depicted as ‘Tax on Tax’.
Before GST –
Suppose a firm offering services for Rs 50,000 and charged a service tax of 15% (Rs 50,000 * 15% = Rs 7,500).
Then say, he should buy office supplies for Rs. 20,000 by paying 5% as VAT (Rs 20,000 *5% = Rs 1,000).
Now he should Rs 7,500 as service tax without having any detention of Rs 1,000 VAT which is already paid on stationery.
His total overcome is Rs 8,500.
After GST –
GST for the service of Rs 50,000 is 18% = 9,000
Less: GST on office supplies is (Rs 20,000*5%) = 1,000
Net GST to pay = 8,000
2. Composite scheme for small businesses – In GST, small businesses (with having a turnover of Rs 20 to 75 lakh) can be benefited as it gives an opportunity to reduce taxes by utilizing the Composition scheme. This move has brought down the tax and cut the burden on many small businesses.
3. Simple yet easy online process – The whole process of GST registration is made online, and it is not complicated. This is very beneficial for start-ups especially, as they do not have to run from pillar to post to get different registrations such as VAT, excise, and service tax.
4. Upgrade the efficiency of logistics – A few years ago, the logistics industry in India had to balance various warehouses across states to avoid the current CST and state entry taxes on inter-state movement. These were forced to operate below their capacity, giving space to increased operating costs. In the GST, however, these boundations on inter-state movement of goods have been down.
As a result of GST, warehouse operators and e-commerce businessmen built their interest in establishing their warehouses at specific locations such as Nagpur (which is the zero-mile city of India), despite every other city on their route.
5. Unorganized sector is controlled in GST – In the era before GST, it was usually seen that some industries in India like construction and textile were highly unregulated and unorganized. In the GST, where there are provisions for online compliances and payments, and for availing of input credit only when the supplier has accepted the amount. This brings in the reliability and regulation of these industries.