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GST (Goods & Services Tax) : Objectives,Details & Benefits

 What do you mean by GST?

‘G’ – Goods

‘S’ – Services

‘T’ – Tax

“Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level under which no distinction is made between goods and services for levying of tax.

It will mostly substitute all indirect taxes levied on goods and services by the Central and State governments in India.

GST is a tax on goods and services under which every person is liable to pay tax on his output and is entitled to get input tax credit (ITC) on the tax paid on its inputs(therefore a tax on value addition only) and ultimately the final consumer shall bear the tax”.

OBJECTIVES OF GST:

  • Firstly,the  main objective of Goods & Service Tax(GST) would be to eliminate the doubly taxation i.e. cascading effects of taxes on production and distribution cost of goods and services.
  • The exclusion of cascading effects i.e. tax on tax till the level of final consumers will significantly improve the competitiveness of original goods and services in market which leads to beneficial impact to the GDP growth of the country.
  • Introduction of a GST to replace the existing multiple tax structures of Centre and State taxes is not only desirable but imperative.
  • Integration of various taxes into a GST system would make it possible to give full credit for inputs taxes collected.

How you will apply GST?

GST is a consumption based tax/levy. It is based on the “Destination principle.”

You apply GST on goods and services at the place where final/actual consumption happens.

GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain.

You can set off GST paid on the procurement of goods and services against that payable on the supply of goods or services.

You as a manufacturer or wholesaler or retailer  pay  the applicable GST rate.

But you can claim back GST through tax credit mechanism.

But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax.

You will collect GST  at  the point of Sale.

The GST is an indirect tax.Tax is passed on till the last stage where the customer of the goods and services bears the tax.

What Benefits you can get from GST?

  •  Stakeholders –

It brings benefits to all the stakeholders of industry, government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive.

 

  • Single tax system-

By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve liquidity of the businesses.

 

  •  Tax incidence-

GST  follows a multi-stage collection mechanism. In this, tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of transaction. This shifts the tax incidence near to the consumer and benefits the industry through better cash flows and better working capital management.

 

  • Time-

GST is largely technology driven. It will reduce the human interface to a great extent and this would lead to speedy decisions.

 

  • ‘Make in India’-

GST will give a major boost to the ‘Make in India’ initiative of the Government of India by making goods and services produced in India competitive in the National as well as International market.

You will charge on  all imported goods integrated tax (IGST) which is equivalent to Central GST + State GST. This will bring equality with taxation on local products.

 

  • Exports-

Exports holds zero-rate in entirety unlike the present system .

Here  you cannot get refund of some taxes due to fragmented nature of indirect taxes between the Centre and the States.

This will boost Indian exports in the international market thus improving the balance of payments position.

Above all,if you are an exporter with clean track record,you will get immediate refund of 90% of their claims arising on account of exports, within seven days.

 

  • Transparency-

GST will bring more transparency to indirect tax laws. This will help the industry to take credit and the government to verify the correctness of taxes paid and the consumer to know the exact amount of taxes paid.

 

  • Records-

    • You dont have to maintain records as taxpayer.
    • Neither you dont have to show compliance with  indirect tax laws of the Central Government and the State Governments like Central Excise, Service Tax, VAT, Central Sales Tax,etc.
    • Secondly,you maintain records and show compliance in respect of Central Goods and Services Tax Act and State (or Union Territory) Goods and Services Tax Act for all intra-State supplies.

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