Will GST be a success?

GST

In Favor :-

  • With the elimination of multiple taxation, taxes will be lower. Hence the burden on manufacturers & prices of goods will be reduced.
  • Tax structure will be simplified. It’s easier to pay a single GST, instead of sales tax, excise tax, entertainment tax, service tax etc. for one product.
  • With the lower taxes, tax evasions will be reduced.
  • With more tax payers, revenue for government will be increased, which is a boost to Indian economy.
  • Foreign investors will more likely to invest in Indian market, because of the transparent tax system.
  • Though state revenue from taxes will be decreased temporarily, it will be increased in the coming days. And Central government is providing 5 year compensation for states.
  • Common use goods will be cheaper.
  • ‘Anti profiteering law’ ensures that benefits of GST will be passed onto consumers. Hence GST will directly benefits customers.

Challenges :-

  • Some industries like food processing industry, movie industry are at trouble with the increased taxes.

What is GST :-

  • ‘Goods & Services Tax’ (GST) is the biggest tax reform in India till now. GST replaces all the indirect taxes in the country.
  • At present there are different tax rates in different states. With GST, tax rates will be equal through out the country.
  • All the indirect taxes such as Excise tax, sales tax, service tax etc. will be replaced by GST.
  • GST also eliminates double taxation. Till now, manufacturers have to pay tax on the goods they manufactured. For example, the maker of wooden toys had to pay tax on the rate of the toy, that he is going to sell. But with GST, he has to pay tax only on the value he added, that means he bought wood from another manufacturer and he added value to it by transforming the wood into toys. He will not pay tax on the wood, because tax on wood was already paid by the wood manufacturer.
  • GST is going to be implemented from July 1st, 2017.
  • A four-tier GST tax structure of 5%, 12%, 18% & 28% will be implemented based on the type of products. For essential goods like food, GST will be 5%, and for luxury goods, GST will be 28%.
  • GST is an international tax regime. More than 160 countries already implemented GST.

What is “Input tax credit” :-

First of all, “input tax” means tax you pay to the govt for the goods you buy. “Output tax” means tax you pay to the govt for the goods you sell. This “output tax” will be added to price of the product and hence will be paid by consumers.

And now, let’s see what is the meaning of “input tax credit”…

For example, Fathima manufacture dresses. She needs to pay Rs.50 tax to government on each dress she sells.

She bought fabric from Anusha. Anusha paid tax Rs.40 to government on the fabric she sold.

So, now Fathima pays only tax Rs.10 to government and informs govt about Rs.40 that Anusha paid on fabric. Government checks the receipts. And then, on paper the total tax Fathima paid is written as Rs.50/-. This is the concept of “Input Tax Credit”. That means you can claim the “credit” of “Input tax” that is paid by your supplier of raw goods.

Conclusion :-

GST will simplify the present complex tax structure in India. Going for global standard tax regime is very beneficial to the country that has a significant dependence on international relations. And with the reduction in tax evasions, Indian economy will benefit.

Afterwords :- What is your opinion on this topic? Express your thoughts in the comment section below.


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Photo Credits : Philip Taylor

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14 comments ✍

  1. GST solves one problem with even more problems,. Govt should. Removing all assessment based taxes and replacing with consumption pos based tax is what is needed.

  2. i think so… because of GST every dealer has to file a return every month and with this return they don’t have enough time to think about tax evasion …because it takes time to think about how can the evade the tax but with every month return they don’t have enough time…and also with the implementation of the GST government has removed checkpost from the outskirts of the cities which create troubles for the truck drivers who take product of any dealer from one state to other or from one city to other…

  3. its too early to comment but it will all depend on compliance… how much the taxpayers are willing to comply… it will not be easy for tax officials to track 8 million taxpayers(as of vat regime) and a lot depend on a specific time frame… returns are very complex… invoicing is a tedious job and whether default is due to ignorance or deliberate one has to face strigent penal provisions… laibility is on buyer… so its early days… hopefully after invedting crores of rupees it will not be a failure

  4. What we are assuming is, because of GST, Only upper middle class and High class people will be affected the most. They will pay higher to satisfy their needs and that is not a big deal for them. That is absolutely wrong. In Reality, who affected the most is the people who are under Below poverty line(In India 29.8% ppl are under BPL) and the Employers who are working for their daily wages. Because GST is affecting the owners of Micro Small Medium Enterprisers (MSMEs). If they pay more tax for everything, they will get Less profit. So what they are doing is, Sending out some employers and running the industry with Minimum workers and forcing them to work more to compensate the loss. So Most of the labors are unemployed,affected and depressed.

  5. India has many taxes like excise tax, sales tax, service tax, entertainment tax, vat etc. These taxes are divided at centre as well as state level. These taxes are difficult to manage and sometimes causes the issue of taxation and inconvenience to business and customer.GST will solve it with single indirect taxation system.

  6. after GST all the household needs are increased .it do not help any middleclass households,insted who will get benfits of it.from milk to oil there is increase in price but there is no change in any pay grades for middle class persons.

  7. Well as we know it’s a great move taken by our honourable PM to reform the taxation regime of our country..But what about GDP growth? As GST implemented ,it may affect the GDP growth of our country..And GDP may fall

    1. GDP will be increased with GST, due to several factors like reduction in number of tax evasions etc.

  8. it is no doubt GST law will be good for everyone as compared to existing law, however it will be apt to implement it with considered approach looking into the circumstances under which our trade and commerce has made its journey. whatever bad things persist in our system needs to be removed giving proper anesthesia.

  9. Anti profiteering law addresses the above mentioned challenge of manufacturers not passing the benefits to customers

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