GST ( goods and services tax) is the new indirect taxation system to come into effect in India. Which replace many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Services Tax Act was passed in the parliament on 29th March 2017 and came into effect on 1st july 2017.
Intension of GST in India:
- The intention is to make India a single market.
- To reduce the cascading effect of tax on the cost of goods and services
- And create a common, cooperative, and undivided Indian market to make the economy stronger and powerful.
- The GST system will combine Central excise duty, additional excise duty, services tax, State VAT entertainment tax etc.
- It will replace all major indirect taxes such as the excise duty, VAT, services tax etc.
Advantages of GST
- Rather than having so many taxes levied by different states and bodies, GST forms a single tax system. GST is essentially a tax that is calculated only on the value-added at each stage in a typical supply chain I.e Manufacturer to the end customer.
- Also, it would be much easier to manage by everyone. Also many taxes like excise duty, additional excise duty, service tax, a customs duty at the Central level would be replaced. Also at state level octroi, entertainment tax, state VAT, etc would be replaced. If we consider this, GST would be so easy to manage as it would replace all of the existing taxes.
- India is such a big country and with a population so large, we cannot directly replace the existing system at one go. It’s better to have dual administration in GST with center and state playing their respective roles in the taxation. The point is GST replaces so many taxes which are there and structures them into a more manageable system.
- The existing structure had so many problems. For example, multiple taxes on the same value at the Central level and level. These taxes were in form of excise duty, service tax, sales tax, and then VAT. Now think from the perspective of a businessman, so many taxes and so many records. The people need to concentrate on the work they do and not managing and understanding taxes. With GST, this issue gets resolved on its own. On every value created tax is paid and then it moves on.
- GST is likely to improve India ranking in the Ease of Doing Business Index and is estimated to increase the GDP
- Providing a comprehensive input tax credit mechanism across the entire supply chain.
- GST comes as the technology backbone which would support the GST. With government backed IT infrastructure everything would be more accountable and transparent
Disadvantages of GST Model
- If we see clearly it is not a single GST but a dual GST- central and state. GST but a dual GST- central and state. This actually is almost the same as it was. If GST has to be a success, it should be a single GST system and not a dual system. Currently, it would add no value but replace old ones with new ones without actual advantage.
- Moving everything to GST is not easy. Also, information and education to people would be a big issue.
- The GST Scheme has increased the cost of operation…..
- Increased tax liability on SMBs…..
- Enhance burden of compliance
- Penalties for non-GST -compliant firms
- The GST would be successful only if it is a single GST regime and not dual. Having a dual GST model would mean the same thing as currently. Across the world, GST is a tried and tested model but in a single administration model.
- GST gives rise to complexity for many business owners across the nation. Insurance premiums become more expensive
- While the government has made the online system very simple, there is still a learning curve that can be challenging for many businesses.