Goods & Service Tax (GST) has been implemented in India since July 2017. Procedure for GST registration is centralised and standardised similarly to service tax registration.
Businesses no longer need to obtain multiple VAT registration. A single GST registration is applicable across India. The standardised registration procedure improves ease of starting a new business in India.
GST has enabled a transitional shift from a complicated, multi-layered indirect taxation system to a single unified indirect taxation system which offers India the much-needed trade boost.
Some of the benefits of GST in India are given below.
- Make in India:
- Support to “Make in India” campaign and foreign investment: This is due to a centralised national market for India created with the help of GST.
- Prevention of cascading of taxes: At every stage of supply, Input Tax Credit is available for goods and services.
- Laws, procedures and tax rates are brought together by GST.
- Economic growth: GST will boost export and manufacturing activity. Employment is expected to increase. Gainful employment will lead to increase in GDP.
- Poverty eradication: GST can help create more employment and financial resources.
- Boost to Indian Exports: GST helps neutralise taxes efficiently, particularly for exports. This will make Indian products more competitive in markets outside the country.
- Developments in States due to improvement in the country’s positive attitude to investment.
- Reduction of tax evasion: Earlier suppliers used to take advantage of tax difference between neighbouring States and between intro- and inter-State sales. With uniform SGST and IGST rates, this has been eliminated.
- Make in India a “manufacturing hub”: It is expected that the average tax liability of businesses will reduce, resulting in lower prices, thus increasing consumption. Increase in production will lead to industrial growth.
Ease of Doing Business:
- Tax regime with fewer exemptions.
- Simplification and uniformity of taxes due to a reduction in multiple
- Reduction in compliance costs: No multiple record keeping for a variety of taxes. So there is a reduction in the costs of employees and other resources for maintaining records.
- Simplified and automated procedures for various processes such as for instance registration, Returns, refunds and tax payments.
- The less public interface between taxpayer and tax administration: All interaction through common GSTN portal.
- Improvement in an environment of compliance: All Returns are to be filed online. Verification of Input Credits can be done online. So transactions have accurate records that can be tracked.
- Greater certainty to taxation system: Procedures for registration of taxpayers and refund of taxes are the same across the country. Formats of tax Returns, tax base, and classification of goods & services are common for all, thus avoiding any confusion.
- Schedules and deadlines are announced for major events like obtaining registration and refunds.
- More transparent and accountable Input Tax Credit: Electronic matching of input tax credits across India.
GST Benefits for Consumers:
- Reduction in final price of goods: Seamless flow of Input Tax Credit between the manufacturer, retailer, and supplier of services
- Lower cost of purchases from small retailers: It is expected that a relatively large segment of small retailers will be either exempted from tax or will suffer very low tax rates under compounding scheme.
- Increase in consumption: Average tax burden on companies is likely to come down. This is expected to reduce prices. Lower prices mean more consumption.
GST Benefits for SME:
- Ease of starting new business
- Faster logistics and delivery
- Reduction in tax burden
For further information, effects of GST on small business are as follows:
- A supplier whose aggregate turnover in a financial year does not exceed Rs 20 lakh does not need GST registration.
- Many SMEs may not have the technical expertise to deal with online systems. They might need intermediaries to register for them. This will add to registration cost.
- Relevant Returns have to be filed first before refunds can be claimed. Processing of refund also depends on compliances of supplier and supplier’s rating.
- Every registered taxpayer has to file minimum thirty-seven Returns during a financial year.