GST Benefits and Impact on Indian Economy
Goods and Services Tax (GST) is an undertaking by the Indian government to transform indirect taxation and allow free flow of goods and services. India is projected to play an essential and ever increasing role in the world economy, and GST is going to help drive that.
Benefits of GST to the Indian Economy
- Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise
- Less tax compliance and a simplified tax policy compared to the current tax structure
- Removal of cascading effect of taxes i.e. removes tax on tax
- Reduction of manufacturing costs due to the lower burden of taxes on the manufacturing sector. Hence prices of consumer goods will be likely to come down
- Lower the burden on the common man, i.e. public, will have to shed less money to buy the same costly products earlier
- Increased demand and consumption of goods
- Increased demand will lead to increase in supply. Hence, this will ultimately lead to a rise in the production of goods
- Control of black money circulation as the system normally followed by traders and shopkeepers will be put to a mandatory check
- Boost to the Indian economy in the long run
These are possible only if the actual benefit of GST is passed on to the final consumer. Other factors, such as the seller's profit margin, determine the final price of goods. GST alone does not determine the final price of goods.
Read more: GST Bill: Who will it benefit the most?
What is India GST?
GST(Goods and Service Tax) is a multi-stage, designation based comprehensive tax imposed at each value addition stage. The replacement of multiple indirect taxes in the country has helped India's Government achieve its "One Nation One Tax" program.
This is one of the largest taxation reform that has taken place in India and passed by the Government. Across the world, many countries have a single unified GST system. However, India has adopted a dual GST model, which means that GST will be administered by both the Central Government and the State Government.
Primary Objective behind GST
Holding the crystal clear slogan "One Nation, One Tax, One Market" it aims-
- To eliminate Indirect Tax issues
- To remove Cascading Tax effects
- To increase the number of tax payers
- To entertain Consumption-based Tax administration instead of Manufacturing
- To bring out a buoyancy in Govt. Revenue
- To diminish Tax evasion and Corruption
Types of GST
1. Central Goods and Services Tax (CGST)
CGST is a tax collected by the Central Government on the transactions of goods and services which are moved within the state i.e., intrastate. The tax collected under CGST is payable to the central government treasury.
2. State Goods and Services Tax (SGST)
SGST tax is collected by the state government and is levied on the transactions of interstate sales of goods and services, i.e., where the sale is made within the state. Under SGST, the tax revenue goes to the State Government Treasury or tp the eligible union territory.
3. Integrated Goods and Services Tax (IGST)
IGST is a tax collected by the Central Government on inter-State supply of goods and services,i.e., where the sale is made outside the state. It applies both to a supply made outside the state and those made outside the country.
GST Rates and Slabs in India
As per the country's socio-economic needs, the Government has decided to exempt certain goods from the GST tax. To reduce the average taxpayer burden, everyday items like fruits, vegetables, bread, flour, newspaper, eggs, milk, etc. is exempt from the taxes.
5% Tax Slab
The GST tax actually begins with the 5% tax slab. The items included in this slab are skimmed milk powder, coffee, tea, sugar, fish fillets, coal, fertilizers, ayurvedic medicine, insulin, cashew nuts, etc.
12% GST Slab
The items included in the 12% slab are butter, ghee processes food, mobile, fruit juice, almonds, packed coconut water, umbrella, food served at non- ac restautant., etc.
18% GST Slab
The items which are included in the 18% slab are, flavored refined sugar, pasta, cornflakes pastries, cakes, detergents, mirror, glassware, marble & granite, paints, vacuum cleaners, sanitaryware, leather clothing, hotels, which charge tariffs in excess of Rs. 7500, movie tickets costing above Rs.100.
28% GST Slab
The highest GST rate in India is the 28% GST slab. It is reserved for sin goods and luxury items like pan masala, dishwasher, weighing machine, paint, cement, sunscreen, AC, fridge, washing machine, automobiles, motorcycle. The 28% GST rate also applies to 5-star hotels, where the actual billing amount of the hotel stay is above Rs. 7500 per night, movie tickets, betting in casinos, and racing.
How will GST impact the Indian Economy?
- Simplification of the tax structure: Reduces tax burden on producers and fosters growth through more production. The current taxation structure, pumped with myriad tax clauses, prevents manufacturers from producing to their optimum capacity and retards growth. GST will take care of this problem by providing tax credit to the manufacturers.
- Enhanced pan India operations: Different tax barriers, such as check posts and toll plazas, lead to wastage of unpreserved items being transported. This penalty transforms into major costs due to the higher needs of buffer stock and warehousing costs. A single taxation system will eliminate this roadblock.
- Transparency in GST system: There will be more transparency in the system as the customers will know exactly how much taxes they are being charged and on what base.
- Increased revenues: GST will add to government revenues by extending the tax base.
- Fostering production: GST will provide credit for the taxes paid by producers in the goods or services chain. This is expected to encourage producers to buy raw material from different registered dealers and is hoped to bring in more vendors and suppliers under taxation purview.
- Increase in Exports: GST will remove the custom duties applicable to exports. The nation's competitiveness in foreign markets will increase on account of lower costs of the transaction.
- SME support: Under the Composition Scheme introduced by GST, the small and medium-sized enterprises(SME's) can now register. According to their annual turnover, they can pay taxes through this scheme.
Read more: GST Impact on SMEs
A Brighter Economy with GST
The introduction of the Goods and Services Tax will be a very noteworthy step in the field of indirect tax reforms in India. By merging a large number of Central and State taxes into a single tax, GST is expected to significantly ease double taxation and make taxation overall easy for the industries.
The most beneficial will be in terms of reduction in the overall tax burden on goods and services for the end customer. The introduction of GST will also make Indian products competitive in the domestic and international markets. Last but not least, the GST will be easier to administer because of its transparent character.
Once implemented, the proposed taxation system holds great promise in terms of sustaining growth for the Indian economy.
Be GST Ready with Deskera
Deskera Books is a GST Ready Business Software that helps automate and streamline the end-to-end business management process. With the auto GST calculation feature, Deskera helps your business to comply with GST regulations.
Get Inbuilt HSN & SAC Codes For Goods and Services
Under GST, all products and services have an associated HSN and SAC code for allocating the correct GST rate. Deskera has all the codes inbuilt, and will automatically apply the tax rates and cess, so you don't have to refer to an excel sheet every time.
Support for Special Economic Zones
Businesses located in SEZ have special GST rules. Let Deskera handle these for you. You just need to let us know if you are located in an SEZ or if you are doing business with someone in SEZ and Deskera handles the taxation for you.
Easily Handle Reverse Charge in Sales Transactions
Is your business eligible for reverse charge transactions? We have you covered. Deskera Books allows easy reverse charge handling automatically and keeps you compliant.
Inbuilt Compliance for Composition Schemes
If you are a small business with annual turnover of less than 1.5 crore, you fall under the Composition Scheme and can choose to pay GST at a fixed rate.
Deskera helps you with calculating and filing GST accurately if you are eligible for composition schemes.
The fixed GST rates for different types of industries in a composition scheme are:
- 1% - For Traders and Manufacturers
- 2% - For Manufacturers: GSTIN has lowered the rate for manufacturers to 1%
- 5% - For Restaurant Sector
- 6% - For Suppliers of Services or Mixed Suppliers)
Create E-way bills
Deskera Books provides easy and quick creation of E-way bills with just one click with a GST-ready application.
- Our application allows you to pull all E-way bill related data with the fields which are mandatory for the E-way bill template in relevant inward and outward documents.
- Once you have filled in this data, you can extract all this information in an excel sheet and validate it using an offline tool and thus avoiding manual data feeding for each transaction.
- After validation E-way, you can upload it on the E-way bill portal. Hence, Deskera allows you to generate E-way bill reports for bulk transactions. Learn More
Access All GST Reports Online
Using Deskera Books, users can now file your GST Returns via India's GST Portal with the GSTR-1 and GSTR- 3B and TDS Summary reports generated from our system. Learn More
- The primary reason behind the GST implementation is to bring about uniformity in the country’s tax system
- There are 5 rates of taxes in GST i.e. 0%, 5%, 12%, 18% and 28%
- After the implementation of GST, sales tax, service tax, customs duty, excise duty, VAT, Octroi tax, etc. will not exist
- GST would ensure smooth credit flow through the supply chain, thus resolving tax cascading inflationary effects
- GST would also open the Indian Economy to FDI through foreign investors who are hesitant to invest in India because of its complicated tax structure
- There is a penalty of 5 years in prison for those who don’t pay GST