On the 32nd meeting of the GST Council, the new registration criteria have been announced for businesses, setting the biggest tax reforms as ’One Tax One Nation’ by doubling the sales threshold for GST registration to Rs 40 lakh. It has allowed certain states of the northeast and small states to keep the threshold at Rs 10 lakhs as against Rs 20 lakhs for other states. By India Inc, the news has been well received that some states chose to stay out of the registration criteria for businesses, yet again exposed how the Centre-States’ differences can hurt GST’S uniform applicability across the nation.
Being a destination-based and indirect tax applicable to the supply of goods and services, GST has replaced 17 taxes along with with that (23 central and state cess) into a single national levy. It has tax slabs of 5 %, 12 %, 18% and 28 %.
Role of GST in India
In India, GST is playing a vital step in the field of indirect tax reforms. By amalgamating a large number of taxes into a single tax, GST is mitigating the cascading effect or double taxation for a common national market. It has introduced a reduction in the overall tax burden on goods, which is currently estimated to be around 25%-30%.
GST is maintaining transparency among the customers as the actual burden of indirect taxes on goods and services would be much more. The introduction of GST would also make Indian products competitive in the domestic and international markets which has a boosting impact on economic growth. Additionally, because of this tax, it would be easy to administer the taxation which as a result will maintain transparency. And also encourage a flexible shift of the economy from the informal to formal. The central government has enacted 3 types of GST-
- Central GST
- State GST
- Integrated GST and Union Territory GST
What are the Advantages of GST?
- Comprehensive and easy compliance for business
All tax-payer services are available to the taxpayers online such as registrations, returns, payments, etc., which would make compliance easy and transparent for the taxpayers.
- Tax rates and structures are uniforms
The Indirect tax rates and structures are common across the country, GST thereby ensures in increasing certainty and ease of doing business. In other words, irrespective, of the choice of place of doing business, GST would make the tax neutral, the final consumer will thus bear only the GST charged by the last dealer in the supply chain.
- Easy administration and removal of cascading effect
Multiple indirect taxes are being replaced by GST. Backed with a robust end-to-end IT system and seamless tax credits, GST ensures that there is a minimal cascading of taxes. Further, GST would be simpler and easier to administer than all other indirect taxes.
- The advantage to the Manufacturer and Exporters
GST is a complete tax system, which helps in comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) which reduces the cost of domestic manufacturing and give boost to Indian exports which as a result increases the competitiveness of Indian goods and services in the international market The tax rate uniformity will also go a long way in reducing the compliance across the country cost.
- GST is a destination-based concept
As against the principle of origin-based concept, GST is a destination-based concept which is levied by the central and state government.
- A Single Tax System
GST, being a single tax system passes right from the manufacturer to the consumer. The Credit of Input taxes paid at each stage is availed in the subsequent stage. The GST is ultimately born by the final consumer.
- Reduction in Transaction Cost
Any change and reduction in the transaction cost will lead to improved competitiveness in the trade and industry which results in a decrease in the cost of collection and increases the revenue efficiency.
Impact of GST on Business
GST has been a major platform in the Indian tax framework. It is expected that the Government’s pro-active measures and industry’s active participation, will make it a truly “Good and Simple Tax” in the coming period. In India, GST has improved the positions of each of these stakeholders. A changed taxation system i.e. GST IS better than earlier taxation.
GST will allow Indian business person to better negotiate its terms in the international trade forums and also aims at increasing the taxpayer base. Bringing SMEs and the unorganized sector under its compliance is making the Indian market more stable than the previous situations and the companies can compete with foreign companies by engaging their business globally.
GST has prevented the cascading effect of Taxes in India by harmonizing the laws and procedures of the taxation which is beneficial for the businessperson and every taxpayer. It has increased the level of transparency and efficient compliances which has improved the level of economy and benefited in the development of the country.