GST Benefits

GST Bill Benefits


The Goods & Service Tax or GST is one of the biggest fiscal reforms in India since Independence. All businesses, small or large, will be impacted by this new indirect tax regime.
GST will be levied on both goods and services and will subsume and replace the current indirect taxes such as excise, VAT, and service tax.

Some of the benefits of GST to the Indian economy are listed below-

benefits of gst

Removing cascading tax effect

An important benefit of the introduction of GST will be the removal of the cascading tax effect. In simple words, “cascading tax effect” means a tax on tax.
Under the current regime, the service tax paid on input services cannot be set off against output VAT. Under GST, the input tax credit can be availed smoothly across the spectrum of goods and services, thus reducing the tax burden on the end user and removing cascading effect.
Let’s take the following example to understand how removing the cascading effect will reduce taxes.

Current scenario

A trader buys office supplies for Rs. 20,000 paying 5% as tax. It charges 15% service tax on services of Rs. 50,000. Currently, he has to pay Rs. 50,000*15% = Rs. 7,500 without getting any deduction of Rs. 1,000 VAT already paid on stationery.
Under GST (assuming GST= 18%)
GST on service of Rs. 50,000 @18%9,000
Less: GST on office supplies (20,000*18%)3,600
Net GST to pay5,400
This will be especially beneficial to industries that involve both goods and services (like restaurant business) and pay both VAT & Service Tax under the current regime.

Higher threshold for registration

TaxThreshold Limits
Excise1.5 crores
VAT5 lakhs in most states
Service Tax10 lakhs
GST20 lakhs (10 lakhs for NE states)
As per the current VAT structure, any business with a turnover of more than Rs. 5 lakh (in most states) is liable to pay VAT (different rates in different states). Similarly, for service tax, service providers with turnover less than Rs. 10 lakhs are exempted.
Under GST this threshold has been increased to Rs. 20 lakhs thus exempting many small traders and service providers.

Composition scheme for small businesses

GST also has an optional scheme of lower taxes for small businesses with turnover between Rs. 20 to 50 lakhs. It is called the composition scheme. It has now been proposed to be increased to 75 lakhs.  This will bring respite from tax burdens to many small businesses. 

Simpler online procedure under GST

The entire GST process – starting from registration to filing returns and payment of GST tax – is online. Startups do not have to run around to tax offices to get various registrations under excise, VAT, service tax.

Lesser number of compliances

Also, the current tax regime has excise VAT and service tax, each of which have their own returns and compliances.
TaxReturn filing
ExciseMonthly
Service taxProprietorship/Partnership- Quarterly
Company/LLP- Monthly
VATDifferent for different states
Some states require monthly returns over a threshold limit. Some states like Karnataka require a monthly return
GST will unify all these, thereby reducing the number of returns and the time spent for tax compliances. There are about 11returns under GST, out of which 4 are basic returns which apply to all taxable persons under GST. There are fears that the number of returns will increase after GST. But the main GSTR-1 will be manually populated. But GSTR-2, GSTR-3, GSTR-4 will be auto-populated.

Defined treatment for e-commerce

benefits of gstMany Indian businesses provide goods and services through the internet. Earlier, there were no specific provisions for treatment of the e-commerce sector. Currently, states have variable VAT laws for this sector. For example, online websites (like Flipkart and Amazon) delivering to Uttar Pradesh have to file a VAT declaration and the registration number of the delivery truck. Tax authorities can sometimes seize goods when there is a failure to produce documents.
Again, these e-com brands are treated as facilitators or mediators by states like Kerala, Rajasthan, and West Bengal which do not require them to register for VAT.
All these differential treatments and confusing compliances will be removed under GST. For the first time, GST clearly maps out the provisions applicable to the e-commerce sector and since these will apply all over India, there should be no complication regarding inter-state movement of goods anymore.

Increased efficiency in logistics

The logistics industry in India had to maintain multiple warehouses across states to avoid the current CST and state entry taxes on inter-state movement. Most of the times, these warehouses were forced to operate below their capacity thus increasing their operating costs.
When GST goes live, these restrictions on inter-state movement of goods will be lessened and the logistics sector might start consolidating warehouses across the country. As an outcome of GST, warehouse operators and e-commerce players have already shown interest in setting up their warehouses at strategic locations such as Nagpur, which is the zero-mile city of India, instead of every other city on their delivery route.
Reduction in unnecessary logistics costs will increase profits for businesses involved in supply of goods through transportation.
Visit here to read more about the impact of GST on logistics.

Regulating the unorganized sector

Certain industries in India like construction and textile are largely unregulated and unorganized. GST has provisions for online compliances and payments, and availing of input credit only when the supplier has accepted the amount, thereby bringing accountability and regulation to these industries.

Conclusion

There is no doubt that GST is aimed at increasing the taxpayer base by bringing SMEs and the unorganized sector under its purview. This will make the Indian market more competitive than before and create a level playing field between large & small enterprises. Further, Indian businesses will be able to better compete with foreign countries such as China, Philippines, and Bangladesh.
However, all will not be smooth sailing. A policy change of such a huge nature is sure to be faced with teething troubles. Experts have also identified some of the disadvantages of GST implementation which could be a cause for worry for some industries.
ClearTax has an All-in-one GST kit specially designed for CAs. Please feel free to read our articles and watch our GST tutorials.
Related Posts:

 about GST in india

















at

6 comments:

  1. company registration 21 September 2019 at 03:45

    nice .. thanks for sharing ...

    ReplyDelete
  2. Tistook24 September 2019 at 22:51


    Thanks for Sharing this awesome & useful Information. Really appreciate for your good work…

    Tistook

    ReplyDelete
  3. Unknown4 December 2019 at 02:21

    Excellent ..post that is nice information for everyone gst return filing

    ReplyDelete
  4. Swarit Advisor7 July 2020 at 02:40

    Swarit Advisors is a performance-driven organization and always aim to provide tailor-made solutions to fulfil every client's business requirement. Swarit's team of experts dedicate themselves in providing the best legal services with their comprehensive understanding of the industry.

    ReplyDelete
  5. BL-India: BIS Registration, WPC Certification Approval, TEC Consultant9 September 2021 at 03:10

    Nice Post!! Thanks for Share Valuable information.. A consultant knows in and out of the BIS Registration process and documentation. They know the minimum standards quality required to produce a set-top box.

    ReplyDelete
  6. Anonymous5 February 2022 at 01:24


    I really appreciate the work you have done, you explained everything in such an amazing and simple way.
    Chennaifilings

    ReplyDelete

Subscribe to: Post Comments (Atom)

Permanent Sinus Relief :

Chronic sinusitis is one of the most common chronic health problems in the U.S., affecting 37 million Americans each year. Especially in t...