The GST implementation is among the most vital tax reforms tabled for discussion in parliament. In the recent times, GST (Goods and Services Tax) is among one of the major undertakings that are expected to provide the Indian economy the needed stimulate the growth by transforming the existing indirect taxation. The Indirect Taxes are very complicated in India. Additionally, there are many different types of taxes that are levied by the state and the Central Governments on the goods and services. Customers have to pay extra VAT (Value Added Tax) on purchasing the goods and service. Also, there is the luxury tax, central sales tax, service tax, excise duty, etc. However, the direct taxes like the corporate tax, income tax, and capital gain tax will not be affected by the new tax structure.
Central taxes includes service tax, central excise duty, special additional customs duty, central purchases, additional customs duty, and cess.
State taxes include VAT, Octroi and entry tax, central sales tax, state cess, and charges, purchase tax, taxes on a lottery, betting, gambling, luxury tax, entertainment taxes.
The Goods and Services Tax is one indirect tax for the entire country that will make India a unified common market. It is the one single tax on the goods and services right from the manufacturer to the consumer. GST is one of the major financial reforms. The main purpose of introducing the GST bill is to bring all the different indirect taxes under one roof which will ultimately bring more scalability and transparency of the tax being levied and all together, making the tax collection process much easier and less complicated than, before.
Below are discussed some of the benefits of the GST (Goods and Services Tax)-
- Eliminating cascading effect of taxes
- With widening tax base, the tax rates will be comparatively lower
- Reduce the number of indirect taxes
- Streamlined and standardized the indirect taxes after GST implementation
- Ease of doing Business-GST it will decrease the burden as they will have to pay only one single tax
- Seamless flow of Input tax credit
- With GST implementation, it is expected that the tax base will increase considerably.
- Prices of the goods and services will fall
- It will help make the tax collection and compliance simple
- Increase the demand as the consumption will increase
- Efficient supply chain management
- Help to promote shift from unorganized sector to organized sector
GST Challenges for Businesses
- Transitional Challenges
The Goods and Services Tax or GST is a gargantuan transition that will affect the entire spectrum of the different business activities, right from the manufacturing, procurement, distribution to the pricing of the goods and the IT system. Therefore, the companies will need to incur the considerable business process re-engineering. The companies will now have to reorganize their business by the new tax law, need to scrutinize each business activity and conduct an impact analysis on the business. This might prove to a daunting task for the small firms and will involve high administrative cost.
- Updating the Tax Compliance system
The business compliance will go online as soon as the GST is introduced in the system. The companies will need to upgrade their online tax compliance system. Additionally, they companies will need to train the staff to use the system. The GST portal has been launched for the providing the assistance for GST enrollment, filling returns and GST registration. Updating the whole system in short duration will be challenging
- Training Staff
The GST tax compliance and structure is different from the earlier tax structure. For this reason, it will be imperative for the companies to provide the needed training to the staff and customers on the new tax regulations, concepts and procedural aspects like registration, uploading returns, etc. It is imperative to be aware and well prepared to fulfill the needed compliance.
- Profitability and Pricing
Under GST requires companies to quantify the benefit of the reduced tax rates and pass on the commensurate reduction in the pricing.
Because of the complex taxation process, the people were unwilling to pay the taxes. However, with the introduction of the GST people will be encouraged to pay the taxes. It is the biggest finance reforms in India and will benefit the common man. Additionally, it will simplify the taxation process and reduce the distrust between states and center owing to one indirect taxation system. GST will make the entire taxation process transparent and increase enforcement of the tax revenues. While there is a basic exemption limit for the small suppliers of products and services, the tax is to be paid to all.
All businesses, be it goods or services, have to conform to different VAT and service tax regulations across the state, which usually added complexity to taxation procedure and business running procedure. With the introduction of the Goods and service tax GST, the difference between the goods and services will have vanished. Also, it makes the invoicing for businesses much easier since there will be only one Tax rate.
The problem will cease to exist as the GST is rolled out. After its implementation, businesses with less than supply turnover of Rs. 20 lakh would not have to register for GST or even collect it. Moreover, the business enterprises with a turnover lying between Rs. 20 lakh and Rs. 50 lakh may have to pay the Goods and Services Tax at a lower rate, as per the composition scheme. This is sure to give a boost to start-ups who may have a nominal turnover initially thus ensuring a lot of relief for them from collection and filing of GST returns, etc.
Goods and Services Tax is a Major Transition and its implementation will bring certain positive and beneficial changes in the economy. It will contribute to the growth of the economy and make the business and process more transparent. However, in the initial stage, the businesses will require bringing up certain changes and upgrading their systems so that compliance with the new tax rules is ensured and the tax returns become efficient.