GST – a planned system considered as One Hundred and First Amendment introduced by The Constitution aims at clubbing most of the existing taxes into a single taxation system. The taxes that are being subsumed into GST at the Central Level are Excise Duty (Central Excise + Additional Excise Duty), Service Tax, Countervailing Tax, Custom Duty and at the State Level are Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax, Luxury Tax, Taxes on Lottery, Betting and Gambling.
GST which is likely to be implemented in July 2017 will be a game changing reform for the Indian Economy after Demonetization. GST will have a widespread impact on almost all the business angles considering the purchasing to manufacturing of goods to supply chain optimization considering IT accounting and tax compliance systems. GST also proposes to track the business transactions with the help of Digital GST Network (GSTN) which will act as a barrier to Black Money.
The taxation load will be divided equally among the manufacturers and the service providers, lowering the tax rates which will be beneficial to the different sections of the society.
Merits of GST Implementation
- GST will be creating a common Indian market that will reduce the cascading effect of tax on the cost of goods and services.
- GST will ensure a common tax structure let’s put it as a tax neutral policy across the country. This will bring ease in carrying out the business from anywhere across the country.
- With the uniformity in tax rates, there will be a reduction in the cost of locally manufactured goods and services leading to the reduction in compliance cost.
- Due to the reduction in transaction cost, there would be an improvement in the competitiveness amongst the businesses.
For Central and State Governments:
- GST backend with robust IT system would be replacing multiple indirect taxes which would simplify the administration of the indirect taxes levied by the Centrals and the State Governments so far.
- Due to a seamless design of GST, there is an easy transfer of tax credit from one stage to another encouraging tax compliance by the traders.
- GST is expected to generate higher revenue due to an expected decrease in the collection of tax revenues.
- There will be a single transparent tax structure which will be proportionate to the value of goods and services. This tax will be enforced by the manufacturer to the consumer.
- There will be a relief in the overall tax burden due to efficiency gain and avoidance in the leakages which will benefit the consumers.
Complete digitization is envisioned with an onset of IT ecosystem for GST. Are you all geared up?
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