By : Akhil Gopakumar
GST (Goods and Services Tax) – Explanation and benefits
After a long wait, in a historic development, the Government of India finally decided to implement GST (Goods and Services Tax). According to latest reports the roll out will start on July 1st 2017. The GST will be finally able to remove tax barriers between states creating a single tax system for the whole country and thereby creating a single market. The roll out of GST will definitely replace a lot of central, state, interstate, local and as many as 17 indirect taxes with a single and nationwide value added tax on goods and services.
Currently the GST council has finalized a four tier tax structure at 5%, 12%, 18% and 28%. The lower rates are for the essential items and the higher rate for the luxury goods.
Taxes GST is expected to replace
Central Excise Duty
Excise Duties (medicinal and toilet preparations)
Additional Excise Duties (goods of special importance)
Additional Excise Duties (textiles and textile products)
Special Additional Customs Duties (SAD)
Additional Customs Duties (or Countervailing Duty)
Central cess and surcharges
State VAT (Value Added Tax)
Central Sales Tax
Taxes on advertisements
Taxes on lotteries, betting and gambling
State cess and surcharges
Benefits of GST
Now this is the million dollar question. The benefits of implementing GST will come in different forms. Lets have a look at the major benefits.
GST will replace a number of indirect taxes. By this the customer will be able to know how much tax he pays for a particular product / service.
Full input tax credit. This will cause in a price drop of various consumer goods as this will encourage suppliers to pay taxes.
GST implementation is expected to boost economic growth by 2%.
There will be no multiple taxation. On implementation, the cost of a good/service will include all the central government as well as the state government’s tax. So there will be no need to pay multiple taxes for the same product.
Make in India campaign will achieve a boost as there will be no indirect taxes and there will also be increased protection from imports.
There will be only a common market as all the interstate taxes are covered. So any business can go nationwide without the fear of paying indirect taxes.
E commerce will also get a boost as logistics and inventory costs will drop. Till now some sellers do not even ship to some states due to state restrictions and interstate levies. GST will make an end to this scenario.
It is also expected that GST will boost exports of the country which in turn boosts economic growth of the country.
Let’s hope this change will bring the prices of essential commodities down and boost the economic growth of India. Everything becomes clear only after the implementation.