Ever since our honorable Prime Minister has announced the comprehensive indirect tax, i.e., GST, which is supposed to be levied on every value addition, it has been quite a subject of debate and chaos. Although it is a matter of an individuals’ perspective & status and it affects different classes of the society distinctly but, to a certain extent, this whole mayhem is in fact not so bad. Let us see why:
Components of GST-
- CGST: Collected by the Central Govt. on an intra- state sale.
- SGST: Collected by the State Govt. on an intra- state sale.
- IGST: Collected by the Central Govt. for inter- state sale.
- Sale within the state is now = (CGST + SGST), which was earlier (VAT + Service tax)
- Sale to another state is now = IGST, which was then (Central Sales tax + Service tax)
Idea behind the implementation-
- Replacing multiple cascading taxes with a unified one- A lot of tax on tax applied previously is substituted by one disguised multi-stage tax as a whole.
- Increasing efficiency in logistics- Under GST, the restriction of operating multiple warehouses for avoiding the current CST and state entry taxes on inter-state movements is reduced.
- Lesser compliances- There used to be VAT and service taxes to be paid earlier which had their own return and compliances but under GST, there is a single return to be filed.
- Composition scheme for small business: Small businesses with a turnover of around 20 to 75 lakh can benefit as the composition scheme brings down compliance burden.
Benefits of single tax imposition-
- Higher threshold for registration-
Previously, the companies with a turnover of more than 5 lakh were liable to pay VAT. Now, this threshold has been changed to 20 lakh which exempts small traders.
- Defined treatment for E-commerce operators-
The undefined, varying, confusing and complicated inter- state movement of goods through e-commerce sector has now been defined under GST regime.
- Regulating the unorganized sector-
A sense of accountability and regulation is now seen in the industries due to provisions for online payments and scheduled operation.
- Transparent and corruption free tax administration-
Because of the online procedure, the mechanism of the taxation system has become more explicit.
- Cheaper prices of basic products for the common man-
Prices of movie tickets, dining restaurants, televisions, two-wheeler vehicles, etc are estimated to be reduced.
- Development of a common national market-
Removing economic distortions will help lead the national market to become more communal and accessible to each section of the society.
- Easy access through online procedures-
Online operational methods such as GST tools and GST software make it effortless to perform the accounting, return filing and billing, etc.
Some numbered snags-
- Grasping the nuances of GST operation
- A higher tax burden on SMEs
- Increased software purchase cost
- GST came in the middle of financial year
Despite the initial disturbance among the masses due to the inconveniently uninviting increment of a combined tax on certain items in question, the impact of this move now seems beneficial with the ultimate decrease in the percentage. Nevertheless, the government has been trying to simonize the road to GST.
With respect to those living below the poverty line, there might not be a direct impact of the GST on them as such, since to the basic necessities like food and clothes, cascading taxes at various stages of manufacturing and producing would no longer apply.
These items won’t appeal the GST but hiked revenue of the GST with a vast tax base offer an impetus to the government to offer more resource for social and poverty alleviation programs.
The key is to just be GST- compliant at any time and it is very necessary to take a leaf from the global economies that have implemented GST before us, and who have overcome the troubles to experience the boons of having a unified tax system and easy credits.
A comprehensive IT system- GST Network will allot universal GST numbers to all manufacturers, traders, wholesalers and retailers. This will simplify the administration of indirect taxes and eliminate leakages. Thus, the GST should benefit all sections of the society to remarkable extents.