Goods and Service Tax (GST) – Today significant portion of our income is going away in Taxes. We pay 20 types of taxes in India. From product manufacturing to consumption we have 30-35% of tax burden.
Indirect taxes from central government are excise duty, customs, services tax etc. State government taxes are VAT, Entertainment Tax etc. Even municipality also imposes taxes like water tax, property tax etc. Tax rates also differ from state to state. To overcome all this complication & to reduce tax burden one common tax Goods and Service Tax (GST) is proposed.
What is GST?
GST or Goods and Service Tax is common tax system proposed by government. As the name suggest it is common tax in economy for Goods and Services. Majority of taxes mentioned above will be replaced by GST. GST will be applicable across country with same rate. This will give benefit to common man in terms of reduction in tax. Even this will be beneficial to businessman. GST is one of the most important tax reform for the country.
GST will cover all stages like manufacturing, consumption, sales of goods and services. This tax will be applicable at national level on all goods and services.
What are the benefits of GST?
Elimination of Multiple Taxes
Biggest benefit of GST is elimination of multiple taxes. All taxes that currently exist will not be in picture. This means current taxes like excise, octroi, sales tax, CENVAT, Service tax, turnover tax etc will not be applicable and all that will fall under common tax called as GST.
Saving more Money
For common man GST applicability means elimination of double charging in system. This will reduce price of goods and services & help common man for saving more money.
Easy Documentation and Return Filing
For businessman GST will be boon. No multiple taxes means compliance and documentation will be easy. Return filing, tax payment and refund process will easy and hassle free.
Tax Credit Benefit
GST will be applicable at all stages from manufacturing to consumption. GST will provide tax credit benefit at every stage in chain. Today at every stage margin is added and tax is paid on whole amount, in GST you will have tax credit benefit and tax will be paid on margin amount only.
For example if there is a tax paid on Rs 1 lakhs at 15% at the first stage then the tax will be Rs 15,000. During the next stage when the same goods are sold by adding margin of Rs 20,000 at Rs 1.2 lakh then the tax would be Rs 18,000 but here tax credit of Rs 15,000 available so the actual tax at that stage will come to just Rs 3000.
GST Collection
GST will be paid only at point of sale. Currently different taxes are payable at different stages like excise, octrio, sales tax. Under GST all these will be eliminated which will be easy to implement and follow.
GST is expected to be applicable by March, 2016. If you are in agreement of GST please show you agreement by sharing this post.