Goods and Service Tax is the official name of the GST. It is an indirect tax that became effective in India on July 1, 2017. In this blog post, we will explain you everything about what is GST? and all the other GST basics you must know.
What is GST?
A value-added tax is imposed on the production, marketing, and use of goods and services. Alternately, GST can be described as a destination-based tax, where the tax is collected at the location of the final consumption, regardless of how far the good had to travel to get there! Credit for taxes already paid on purchases or inward supply is permitted at every stage of the supply chain. And the buyer of the goods or service is the one who pays the final bill. The Central Board of Indirect Tax and Customs has set different rates (CBIC).
GST in India: Introduction and Overview
The Indian indirect taxation system has significant inherent flaws that the GST, the largest tax reform implemented in INDIA since independence, has paved the way to address. Hence, we must focus on understanding the GST structure and framework to know what problems it has addressed. Some of the major incompetencies that were redressed by GST are:
- Short comings in the VAT system
The cascading effect, also known as double taxation or tax on taxes already paid, most severely affected the VAT system. With GST rates and classifications in India, the issue was resolved. A manufacturer used to pay excise on the production of goods that were used to make other goods that a dealer would sell later. Additionally, he paid either VAT or CENVAT on the price inclusive of excise while making the sales. which ultimately increased the burden on the consumer by resulting in double taxation. GST has successfully fixed this flaw.
- Getting rid of the current tax system’s glitches
The recently implemented Goods and Service Tax has addressed the widely discussed problem of classifying a product as a good or service. There were numerous disputes and misunderstandings regarding the issue of whether to classify a product as a good or a service, which also caused problems when determining the tax rate. All these contradictions have been resolved since the GST introduced the concept of supply.
- Simple compliance
Clearly, trying to manage 1000 tasks at once results in poor management and inefficiency. The same is true of our previous indirect tax system. It was difficult to manage so many taxes with so many different constitutional bodies. Due to the elimination of the need for separate records or compliance with various legal requirements, GST compliance and return filling process has simplified.
Better monitoring has resulted from simple compliance. Now, it is possible to use the GST’s synergies to quickly take the necessary actions. which will support the development of an effective indirect tax system in India.
- More expedited solutions and actions
The GST audit and assessment process in India has greatly simplified tracking. A person who had previously experienced resentment or a question was transferred from one location to another in the name of various current laws. Due to the numerous laws that apply, disputes that are still pending cannot be resolved. After the introduction of the GST, all of these complaints would decrease. One Nation, One Tax, as it stands.
- Single-window clearances
A person in charge of the business found himself or herself in a hopeless situation due to numerous registrations and formalities under various laws. GST registration process and eligibility criteria is a blessing for everyone who had to run to various offices to complete compliance procedures. After GST, taxpayers would be content to abide by a straightforward set of regulations under a single tax standard.
- The simplicity on both sides
People used to file their taxes differently for various taxes under previous tax systems. The issue has been eliminated thanks to GST. Now, regular tax payments are necessary. In addition, the GST law only requires filing a small number of returns known as GTSRs, and no separate due dates for various laws need to be bookmarked.
- Effective set of Input Tax Credit (ITC) under GST
Taxes were imposed at both the Central and State Levels, which caused inconvenience and additional costs as well as a problem with tax credit setup. Due to its status as a single tax at both the federal and state levels, GST has been a boon for taxpayers by allowing for the most credit setoffs.
Advantages and Disadvantages of GST implementation in India
Let us have a quick glance over some hits and miss of GST:
Advantages
- Unified Tax System
Eliminating various taxes from the Indian tax system was one of the main objectives of the GST’s implementation. There were several taxes such as VAT, service tax, and others before the GST was established. All such levies have been abolished with the impact of GST on various sectors of the Indian economy. Nowadays, there is only one tax.
- Easy Access
The GST portal is accessible to anyone at any time sitting anywhere. The filing of returns is made easier by this. For all different kinds of organisations, this is very advantageous.
- Logistics Efficacy
Several prior tax structures, including VAT, have been replaced by GST. Therefore, there is no need to pay state-level taxes during interstate movement because the business already paid to the centre and state before the transportation of goods, which improves logistics and operations.
Disadvantages
- Real estate industry losses
The real estate market has been significantly impacted by the introduction of the GST. Real estate prices have increased by 8% as a result. As a result, demand for real estate has decreased by 12%. But it is possible that this is just a passing trend that won’t last forever.
- Income Tax Credit Inconsistency
The first few applications will result in significant initial tax payments as the tax guard changes. They will only be able to use the tax input in the final stages though once the loop is activated. If this were the case, there would be an Input Tax Credit (ITC) under GST mismatch when the tax was first applied.
CONCLUSION
India may become a preferred location for businesses if the government responds favourably to industry demands with help of GST, and the economy may continue its post-pandemic growth story with robust collections.
Via The India Results https://ift.tt/DFCa2vu