Advantages of GST

Advantages for the government:

  • Will help to create a unified common national market for India, giving a boost to foreign investment and �Make in India� campaign;
  • Will mitigate cascading of taxes as Input Tax Credit will be available across goods and services at every stage of supply;
  • Harmonization of laws, procedures and rates of tax between Centre and States and across States;
  • Improved environment for compliance as all returns are to be led online, input credits to be verified online, encouraging more paper trail of transactions at each level of supply chain;
  • Similar uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighbouring States and that between intra and inter-state sales;
  • Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and service s will lend greater certainty to taxation system;
  • Greater use of IT will reduce human interface between the taxpayer and the tax administration, which will go a long way in reducing corruption;
  • It will boost export and manufacturing activity, generate more employment and thus increase GDP with gainful employment leading to substantive economic growth;
  • Ultimately it will help in poverty eradication by generating more employment and more financial resources.

Advantages to Trade and Industry

  • Simpler tax regime with fewer exemptions;
  • Increased ease of doing business;
  • Reduction in multiplicity of taxes that are at present governing our indirect tax system leading to simplification and uniformity;
  • Elimination of double taxation on certain sectors like works contract, software, hospitality sector;
  • Will mitigate cascading of taxes as Input Tax Credit will be available across goods and services at every stage of supply;
  • Reduction in compliance costs - No multiple record keeping for a variety of taxes - so lesser investment of resources and manpower in maintaining records;
  • More efficient neutralization of taxes especially for exports thereby making our products more competitive in the international market and give boost to Indian Exports;
  • Simplified and automated procedures for various processes such as registration, returns, refunds, tax payments, etc;
  • Average tax burden on supply of goods or services is expected to come down which would lead to more consumption, which in turn means more production thereby helping in the growth of the industries manufacturing in India.

Advantages to Consumers

  • Final price of goods is expected to be transparent due to seamless flow of input tax credit between the manufacturer, retailer and service supplier;
  • Reduction in prices of commodities and goods in long run due to reduction in cascading impact of taxation;
  • Relatively large segment of small retailers will be either exempted from tax or will suffer very low tax rates under a compounding scheme - purchases from such entities will cost less for the consumers;
  • Poverty eradication by generating more employment and more financial resources.

Advantages to States

  • Expansion of the tax base as they will be able to tax the entire supply chain from manufacturing to retail;
  • Power to tax services, which was hitherto with the Central Government only, will boost revenue and give States access to the fastest growing sector of the economy;
  • GST being destination based consumption tax will favour consuming States;
  • Improve the overall investment climate in the country which will naturally benefit the development in the States;
  • Largely uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighbouring States and that between intra and inter-state sales;
  • Improved Compliance levels of the tax payers will contribute greatly in improving the revenue collection of the States.

Written by princy

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