There is nothing more complex in India than the taxes which are applicable on the goods. It is very difficult for a common man even to understand what type of tax they are paying? Here we have a solution to the problem as we are providing the information about the goods and services tax that are soon going to be implemented in the Indian tax system. Let us have a look at the advantages and details of this new system.
What is GST?
What if this complex system is changed to a much simpler system? We mean to say that right now there are different taxes which are imposed by the state government and others are imposed by the central government. So there is a provision in which there is only one tax which will include both the state taxes and the central taxes. This system of applying a single tax is known as goods and services tax.
It has been a very long time since this bill was proposed in the in Lok Sabha i.e. in December 2014. It is expected that the bill will be a part of the next budget and hopefully, it will be a huge benefit for all of us.
How is GST Applied?
Let us now discuss the principle of application of GST. The criterion behind the goods and services tax is based on the place where the final product or services are consumed. There are total four stages of the lifecycle of the product i.e. manufacturer, Wholesaler, retailer and then finally consumer.
Right now, the consumer bears the whole pressure of the taxes. No doubt, after the application of goods and services tax also, the consumer will bear the tax but a lot of pressure will be reduced from the shoulders of the consumer as the double charging of tax will be eliminated.
The goods and serviced are also divided in which GST will be applicable or not? GST will not apply to alcoholic liquor and hence same state taxes will be applied to it. GST on petroleum and petroleum products is yet to be decided but till next further notification, GST will not be applied to these products and same old sales tax, CST and excise duty will continue to be levied on them.
Benefits of goods and services tax:
• The first and foremost advantage is the simplification of a tax system in India. Thanks to the goods and services tax for this.
• For state and center: The GST will be a huge advantage for the state and Centre and hence lead to the development of the country. The experts are saying that there will be an increase of approximately 15 billion dollars in one year. More profit means more development and hence more employment opportunities.
• For consumer and companies: As taxes will be collected at every stage of the lifecycle, so it is expected that prices will lower down and hence consumer will be benefited. On the other hand, due to lower prices, more consumption will be there and hence demand will also be more resulting in the rise of the manufacturer companies.
• Less Corruption: As there will be a decrease in the number of tax departments and hence corruption will also be less. This will solve a huge purpose of most of the population of India as corruption is a big issue.
• There will be no differentiation by states. Presently, there are different state taxes for different states. This will be removed and there will be equality in taxes.
There are lots of benefits of GST but along with that, there are certain challenges also which we need to face while implementation. The biggest of all is that it is yet to be passed in parliament. If it is passed, the changes have to be done at each level of the product lifecycle which requires a lot of infrastructure and many more things. Let us see what happens next.