India witnessed revolutionary changes over the past few years in the form of demonetisation, Swachh Bharat Abhiyaan and GST. GST emerged as one of the key aspects among all these changes and has created another surge of reforms. The emergence of GST in India is believed to be the most happening event of 2017 till date. GST eliminated a number of indirect taxes and is rising with the notion of ‘One Nation, One Tax’. Referred as the Goods and Service Tax, the implementation of GST as a major reform in the taxation system has triggered the new aspects to proliferate faster than never before.
What is GST?
Goods and Service tax was passed in the Lok Sabha on March 29 2017, and came into operation with effect from July 1 2017. In simple terms, GST is a comprehensive and a destination based tax that is levied on every value addition. It is an indirect tax levied on the supply of goods and services all over India. This indirect tax is said to be multi stage tax encompassing the manner in which the product reaches the final customer from the manufacturer.
A simple instance can clear this tax in the best possible manner. If the goods are being manufactured in Rajasthan and are being sold to a consumer who is in Karnataka, the entire tax revenue in such a case would go in the hands of Karnataka. This is so because; GST is a destination based tax; as discussed earlier as well.
The idea of GST dates back in the year 2000, when for the first time PM Atal Bihari Vajpayee set up a committee to draft the GST. Slowly and gradually, with the passage of time this idea got nod from almost all the major committees and political parties. PM Manmohan Singh played a major role in drafting the rates and making all the aspects a computer based operation.
A product will be sold at the same price all over India with the introduction of GST. A major reform in the Indian Taxation history, GST is all set to eliminate the unwanted paperwork and working capital costs in all the major institutions. It has also made all the practising Chartered Accountants stand at the same place with their competitors in the Indian dynamic market.
What are the components of GST?
The Finance bill placed by the Honourable Finance Minister of India in the Parliament for implementing GST in the country covers 3 main applicable taxes levied under the GST. These are:
>Central Goods and Service Tax (CGST)
>State Goods and Service Tax (SGST)
>Integrated Goods and Service Tax (IGST)Check Here: Why we need GST Accounting Software ?
The CGST and IGST are collected by the Central Government while the SGST is a state matter subject and is collected by the State Government per se. In case of sale of goods and services within a state, revenue will be shared equally by the centre and the state. In another prospect, where the goods are sold to another state, there will be only one type of tax which is collected by the Centre. The Central Government will then share the IGST revenue on the basis of destination of goods and services.
Clearly, the change in the taxation system will benefit India in a great way in the coming years. A number of reasons can prove this statement; let’s discuss them all one by one.
Sumptuous Fore Deals of GST
The idea of Goods and Service tax has become a notion of Good and Simple Tax. The transparency level in this very section of tax is awe inspiring and playing a supportive role in the development of India and its people with the tax revenue generated from the same. The major reasons for the adoption of GST in place of other indirect taxes are as under:
> Lesser Compliances
The introduction of GST has eliminated unwanted compliances for the companies and firms to a large extent. The paper work and ultimately the cost of maintaining heavy records for each citizen has gone down dramatically. All this has resulted in cost effective operations which has aided the Government to divert the expenses towards the overall development of the system.
> No cascading effects of tax.
Imposing tax on the tax is known as cascading effect which was in operation earlier. GST eliminated this problem from the system in a way that it is imposed only on the value added at each transfer of ownership. Eventually, this reduces the burden on the ultimate consumer who earlier was compelled to pay a major portion as tax for being the end user.
> Composition scheme for small business
GST includes a system wherein the small businesses are given a good option to opt out for. Approximately 5 Lac businessmen have opted for the composition scheme which allows them to pay taxes at concessional rates and make compliance easier than earlier. Composition scheme is a convenient way for the small tax payers to stay away from too many GST formalities.
> High threshold for registration
The increase in the threshold limits in Goods and Service Tax came as a big sigh of relief for the traders and service providers. GST will be applied only when the turnover of the business exceeds 20 lakhs in a year. This means that the registration and accounting for GST is applicable only when the traders fulfil this condition. This limit in the north eastern states is limited to 10 lakhs only.
> Regulating the unorganised sector of the economy
Many a times it as discovered by the concerned authorities that the unorganised sector in the economy is earning huge bucks but the tax collection from that particular section is either nil or not up to the mark. GST ended this practice wisely and made each and every trader to come under the trader for the scrutiny of one’s income and business on the whole.
> Effective Implementation of GST
The Central and State Government have jointly registered Goods and Service Tax Network as a non – Government company and a not for profit organisation for the effective execution and working of the newly started tax reform. This GSTN is responsible for sharing IT infrastructure and services to the Central and State Government together with the taxpayers and other stakeholders.
A comprehensive IT structure with a common GST portal can serve the purpose of GST implementation in the country in a great way. Providing a uniform user friendly interface to the taxpayers and service of easy registration are the two key objectives of the GSTN. This GSTN will be accountable for providing a backend IT module to certain states and administering returns and payments from all the tax payers.
The guidelines of this newly formed organisation enlists that there will be no manual filing of returns and almost all the returns will be self- assessed. There is no need of manual intervention as all the returns will be filed online and the mis- matched returns would be auto generated.
Clearly, IT will be a crucial aspect to look out for in the implementation and execution of GST in the country in the initial stages. The respective Governments are looking into this matter together with suggesting some accounting softwares for GST as well.
Possible changes due to GST
Carrying out the formal proceedings successfully is undoubtedly a big achievement for the Government at the centre. The possible outcomes of this particular decision can only be anticipated at present as any reform in the economy takes time to show its effect in the long run. Some of these outcomes are listed below.
> GST will improve the collection of tax for the Government as it aids in reducing tax evasion in the country by integrating the country through a uniform tax rate.
> It will boost the development of the country as a whole by removing the indirect tax barriers and disputes between the states.
> Certain class of products will be of the same price throughout the country. This is a major prospect to look out for as the introduction of GST in the country is believed to curb the problem of black marketing and hoarding in a great manner.
> The tax rates defined under the GST clearly provides the applicable rates on certain commodities of goods and services. Even a lay man can get it by investing a little time over the tax rates as these have been defined by keeping a common man in consideration.
No doubt, it is a positive step for boosting the Indian economy in the coming years. It is a well -known fact that each coin has two faces; but in this case it is a bit different. Apart from one or two minor observations to deal with, GST is ready to trigger the Indian economy on a growth and development platform on the global level.
The revolutionary change in the Indian taxation system is believed to reap sumptuous fore deals in the coming years for sure.