Things You Need To Know About GST in INDIA

On Friday Midnight, the country’s eyes remained on their TV sets as the new system of taxation - Goods and Services Tax (GST) system was introduced to the country. The system is a personification of the ‘one nation, one tax, one market’ phrase.

The goodsd and services will now fall under five categories : 0%, 5%, 12%, 18% and 28%. Finance Minister Arun Jaitley has said that after the implementation of this tax system, inflation will go down, tax avoidance will be difficult and India’s GDP will benefit considerably. This of course, will have an impact of the common man’s life. Here are 10 ways GST will affect all our lives.

Things You Need To Know About GST in INDIA

1. PAY ONLY THE LAST POINT OF TAX

The input tax credit introduced is an important aspect of this. The end consumer will have to only pay the GST charged by the last point in the supply chain. The input taxes paid at every stage of production of a thing can be availed in the later stages of value addition.

2. TAX REDUCTION BENEFIT

Due to the input tax credit, the service providers as well as goods manufacturers are now able to pass benefits to the final customer. Also due to the anti-profiteering clause in the GST, it is mandatory to pass on the benefits of tax reduction to the consumer.

3. ALCOHOL, PETROL KEPT OUT

One can sigh relievingly as products like diesel, petrol and aviation turbine fuel have been kept out of GST as of now. Even alcohol has been temporarily exempted from the GST. The decision on these will be taken on these by the GST council some time later.

4. BURDEN TO LOWER WITH TIME

The Reserve Bank of India (RBI) has said in its latest monetary policy statement that the overall inflation will not be impacted by GST. Select services like Banking and Finances will have an increase in their tax rates, but according to economists, the tax burden will disappear with time.

5. SERVICE SECTOR TO BE AFFECTED

An inflationary short term impact of GST will be seen on the service sector as the tax rate could shoot up to 18%. With time, however, it is expected that because of reduced cost due to availability of GST credit on items that have not been available up till now, prices will come down considerably, thus benefitting consumers.

6. REVISED MANUFACTURING PRICES

It is quite possible that manufacturers will wait for a few weeks to check how the net impact of GST has affected them and also the market of wholesalers and distributors. The possibility of manufacturers revising their prices will affect the consumers later.

7. STOCK MARKET EFFECT

There have been many highs recently in the time from announcement to the implementation of GST. The domestic markets, especially, are looking at implementation of GST with some companies hitting newer highs in their stock prices in this fiscal year. Analysts predict that markets require some time to adjust to the GST implementation process. This could affect and partially damage corporate earnings in the short term but will be beneficial over long term.

8. EASE OF DOING BUSINESS

GST will be replacing multiple taxes, interfaces and compliances into one regime. This would be a great benefit for those having their own businesses. The filing of taxes will now be easy as well as transparent, therefore getting tax compliance from the society. This will lead to a better revenue for the government as well as people.

9. SMALL BUSINESSES, BIG BENEFIT

The small scale industries and trades who have less than Rs. 20 lakh as their annual turnover will be exempt from the GST. The small businesses will benefit by not meeting detailed compliances like the larger ones. The input tax credit, however, they will not be exempted from. Those with an annual turnover below 75 Lakh, under composition scheme, will have to pay 1% tax on turnover. Manufacturers will have to pay 2% and restaurant businesses will pay 5%.

10. TAX COMPLIANCE = HAPPY GOVERNMENT = HAPPY CONSUMERS

The GST is considered to be a structural reform that is not just transformational for our economy, but also beneficial in multiple ways - creation of a better national market; ease of doing business will be enhanced and an improved tax compliance. The GST implementation will lead to in benefits for everyone who is a part of the Indian economy – both businessmen as well as consumers.