GST Stands for Goods and Services Tax which is a vital regime in India. It is the biggest indirect tax reform since independence. It is levied when a consumer buys a good or service. GST is a single indirect tax that combines several indirect taxes such as Service tax, Central Excise tax, customs tax, VAT tax etc. The GST has created a single market for more than a dozen state levies.
How does GST Work?
GST works in a very simple process as it is an indirect tax of a nation, that combines several indirect taxes including VAT tax, services tax, central Excise tax, customs tax etc. It means that by removing other indirect taxes the government is collecting a single tax on the supply of goods and services.
Structure of GST
The GST tax structure comprises three tiers that are Central Goods & Services Tax Act (CGST), the State Goods & Services Tax Act(SGST) and the Integrated Goods & Services Tax Act(IGST). The CGST and SGST which are applicable in the case of the Intra-state supply of Goods and Services are shared in equal proportion between the centre and state and the IGST is applicable in the case of the Inter-State supply of Goods and Services. The Central GST covers several taxes including central excise duty, service tax, CVD, SAD, excise duty on M&TP etc. On the other side, State GST is applicable in the case of Intra-state sales of goods and services. Several indirect taxes come under the SGST including entry tax, entertainment tax, VAT/sales tax and luxury tax etc. Whereas, the IGST is a combination of CGST and SGST and the Centre government collects this tax in the destination State.
What will be the Influence of GST on the Economy?
Every person wants to know about the GST impact on the economy. Some people think that it will be negative and some say that GST will have a positive effect. According to the sources, there will be a good impact on the economy due to the following:
- The business cost might be lower
- Gross Domestic Product will increase
- We will gain competitive pricing
- Prices of fixed goods and services become less
All companies are paying a single tax instead of multiple indirect taxes.
Advantage of GST
There are several advantages of GST. The benefits are mentioned below:
- Transactions, where both VAT and Service tax were leviable on goods and services, are now liable to only on tax i.e. GST.
- There is no cost to registered retailers and there are no extra taxes, therefore any type of business could start at a low cost.
- GST is going to increase India’s expected Indirect Tax.
- Prices of goods and services are expected to be reduced more in near future due to the lower tax burden and seamless flow of input tax credits.
- It will help the Indian economy to promote exports.
- It will also raise employment and will certainly boost the growth of India.
Disadvantages of GST
As we already know everything has two sides- good and bad. Therefore, now we are going to highlight the GST’s faults after several months of implementation, we can clearly judge some bad impressions of GST in India that are mentioned below.
- Some economists assume that components of GST-CGST, SGST, and IGST are nonsense. All these components are renamed from Central Excise/Service Tax, VAT, and CST
- Online mode of form filling has created hurdles for businesses and the common person
- GST is very new for all. So proper implementation and guidance are necessary to fill the forms which are not provided by the government
- The benefits of reduction in prices of goods and services are not reached to consumers and the big marketer has taken advantage of it
- Most of the merchants and small businessmen are not so educated. For them keeping track of invoices and filing 37 returns in a year is not that easy.
How is GST Beneficial for the Companies and Individuals?
In the GST, the Centre and State levy a single tax on the manufacturing and sale of products. And the prices of products are likely to be less. When prices of products are low then consumption of products is going to increase and more consumption means more production. Therefore, the companies will grow rapidly. A few years later, the impact of Goods and service tax will be clear on the economy and it will come down the inflation rate in India, according to experts.
Main Purpose of GST
GST will strengthen the economy by all means. As GST will try to ascertain the actual cost of products from the manufacturers and will make a beneficial transaction for the consumers. It will further increase compliance which will help in eliminating any chances of tax evasion. It is anticipated that the GST will increase the overall transactions online and will give a digital boost to the economy of India.
