The research done by an economic survey which was also presented in the Parliament, Stated About formed structural positiveness in the second thought. The former Chief economic advisor Mr Arvind Subramanian who was the man behind the drafting of the economic survey stated that the positive benefits for the Indian economy are set by various structural changes and measurements seeking actions and growth. Also, it was added that the GST is set to bring some fruitful benefits to the Indian economy.
There are a total of 10 benefits to the Indian economy, which are regarded as hidden in the reports presented by the surveys:
Whole Textile Industry Under GST Net
In the survey, it was mentioned that the clothing and textile sector is now totally under the tax ambit due to the introduction of GST. It stated that “Previously, some parts of the value chain, especially fabrics, were outside the tax net, leading to formalisation and evasion. Some anomalies favouring imports of fabrics over domestic production will need to be rectified but overall the tax base has expanded.”
Work Contracts Now Taxable
As the survey revealed that the works contract which is in the real estate sector, is now a beneficial affair as it is bound to pay taxes. In the survey, it was mentioned that “This, in turn, would allow for greater transparency and formalization of cement, steel, and other sales, which tended to be outside the tax net. The formalization will occur because builders will need documentation of these input purchases to claim the tax credit.”
Simpler Compliance
With common definitions, formats/forms, interface and systematic laws, procedures and tax rates, the GST has made the system simpler for taxpayers. The issues of Inter-state disputes, compliance costs, and entry tax are also reduced.
Tax on Imports Bound to Increase
In the previous tax scheme, it was seen that the SAD to offset the state VAT and the countervailing duty for offsetting the excise tax was earlier not adequate to meet the demands of economic agendas from the importing duties. Now the implementation of GST will strike off many inadequacies which were hovering over the importing activities. In the survey, it was mentioned that “Under the GST, the full taxes on domestic sales levied by the Centre and the states (the IGST) will be levied when imported goods first arrive into the country with full tax credits available down the chain to a greater extent than previously.”
Read Also: Brief Introduction About SGST, IGST, CGST with Input Tax Credit Adjustment
Tax Base Will Expand
In the research and survey done by the former chief economic advisor it was found that in the implementation of goods and service tax, there are hints of tax base expansion in early times. As the June and July of 2017 saw a new registrations pool of taxpayers into the GST, the number was around 6.6 lakh newly registered agents which were earlier outside the tax ambit, registered themselves. It is also speculated that the number of registrations is bound to increase the registering under GST has brought a lot of benefits to them. In the survey, it was said that “Preliminary estimates point to potentially large increases in the tax base as a consequence.”
Increased Threshold Limit
Earlier under VAT, the threshold limit was Rs. 5 lakh and under service tax, it was Rs. 10 lakh. With the GST implementation, the threshold limit has increased to Rs. 20 lakh or 40 lakh which will be beneficial for small businesses and traders.
Sufficient Tax Data Availability
In the earlier tax scenario, there was a situation where the tax data was not sufficient to be studied for the purpose of making adequate formalities. But now in the scanner of GST, it is supposed that a lot of significant tax data will be generated through the means of direct tax collection channels. In the previous tax scheme, where the excise was applicable at the manufacturing stage and by which the centre was not having adequate tax data on the MSME production companies with consumption tracking. It was also the issue of no or fewer tax data of the small firms in the production category of outside the borders. The statement of the survey mentioned that “Under the GST, there will be seamless flow and availability of a common set of data to both the Centre and states, making direct tax collections more effective.”
Financial Records Stability
In the long run, the business units may have beneficial output from all the details and tax data maintained by the obligations of goods and services tax. According to the survey and its findings, it was said that “Small businesses can build up a real-time track record of tax payments digitally, and this can be used by lending institutions for credit rating and lending purposes. Currently, small businesses are credit-constrained because they cannot credibly demonstrate their financial capability.”
Improvement in Logistics
According to the research and survey findings, it was revealed that the implementation of GST has actually made a striking improvement in the logistics cost along with several benefits like reduced transportation cost, fuel consumption and check post corruption. It is a sure shot now that the implementation of GST will bring some added advantage to the logistics and transportation sectors with increased interstate trade. It is learned that the check posts across the nation are being removed due to the GST and it will be added advantage for both the tour operators and logistics companies. According to the reports by the chief economic advisor, it is stated that “so far 24 states have abolished the check posts, while others are in the process of eliminating them. If the trend continues, the reduction in transport costs, fuel costs and corruption could be significant.”
Composition Scheme Benefits
With GST implementation, small traders felt relief due to the introduction of the composition scheme. Taxpayers with less than Rs. 1.5 crore of turnover are eligible to participate in this scheme and get relaxation in GST tax rates. So, this move reduces the compliance burden on many traders.
