GST: What Is It? Why Is It Important?
GST Act (Goods and Services Tax) is India’s first much needed Indirect tax reform. GST is a unified tax on products and services exports. It is a tax dependent on the destination. GST will encompass Federal Excise Law, Tax Law on Utilities, VAT, Entry Tax, Octroi, etc.
Although the current structure requires a multitude of taxes to be raised by an unreliable and invisible system, it is expected to be rationalized with the implementation of GST and thus close the weak links in this method. It would allow the administration to curb pilfering and validate the entire taxation system.
While other regions are either inadequately-taxed or are not taxed or over-taxed, GST would help companies reduce their total tax burden.
In the evolving economic climate, implementing a unified Goods and Services Tax (GST) to substitute the current various tax systems of central and state taxes is not only feasible but also imperative. Resources and services are primarily used by consumers or used in the manufacture and sale of goods, and vice versa.
Differentiated taxation of products and services also requires breaking the valuation of sales into the valuation of taxes products and services, contributing to higher costs of regulation, management, and enforcement.
Moreover, the Indian economy is being rapidly internationalized. A host of Free Trade Agreements (FTAs) were signed recently, which would enable duty-free or rather low tariffs for imports to India. Therefore, a countrywide clear and straightforward taxation structure is required to allow the industry in India to succeed not only globally but even in the domestic economy. Integrating multiple national and regional taxes into a GST program will cause full credit to be provided for taxes received on inputs. GST, which is a destination-oriented sales tax based on the concept of VAT, also would help significantly in eliminating economic inequalities created by the present dynamic tax system and help to establish a common national market.
A basic requirement for a successful implementation of GST is that both Central and State govt should abolish current taxes on products and services such as VAT/State Sales Tax, Excise, CST, Entry Tax, and every other state and central cascading taxes.
Any reductions arising from the elimination of several taxes are expected to be covered by the increased GST receipts that would be generated from utility taxation and from exposure to GST on imports. In addition, India will gain maximum efficiency gains of a single unified VAT, while preserving a federal framework.
The positives of GST regulations would be the consistency of rules across the nation, better transparency, equality of tax rates on specific products; provision of credit on interregional transactions, and elimination of enforcement conditions. If GST is introduced in the true sense, there would be a lot of good for stakeholders and a stronger tax climate.
Listed below are a few important ways that GST will affect us
Tax Structure Is Simpler
With GST implementation, several taxes are removed on a product or service and one tax is brought in. The tax system will be much clearer and simple to comprehend when it comes to applying it. Documentation will get easier, and companies will see a decline in accounting difficulties. A straightforward taxation system will increase the productivity of the manufacturing industry and save both time and money.
Competitive Pricing
GST would do away with all other kinds of indirect taxes. This means that in most situations the tax charged by the end customer should be lowered. Lower rates should continue to improve demand,this, in turn, will help industries. The most important thing about GST is that it charges products and services on a common basis.
Tax Revenues Are Increased
A simplified taxation system can give additional compliance, thereby improving compliance among the number of taxpayers and,also help in increasing the national tax revenue streams. The present incarnation of the Indian market is seeking economic restructuring and economic deficit elimination. A recent CRISIL study notes that GST is the best option for achieving fiscal consolidation for the region.