Are you aware of the GST Bill and its significance? As a responsible citizen you should have a proper knowledge about GST Bill and its whereabouts. MoneyMindz, Financial Advisory Portal, finds it necessary to educate every individual regarding the GST Bill. Through this article the concept of GST Bill will be made clear to every person who is not aware of it.
What is GST bill?
Goods and Services Tax (GST) is defined as the tax levied when a consumer buys a good or service. It is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services. GST aims to replace all indirect levied on goods and services by the Indian Central and State governments. GST would subsume with a single comprehensive tax, bringing it all under a single umbrella, eliminating the cascading effect of taxes on the production and distribution prices of goods and services.
Current Scenario: Cascading effect of taxation
The current multi-staged tax structure has charges from the State and Union governments separately, leading to cascading effect of taxes. There are taxes at different rates and at multiple points. The Centre has taxes like Income tax, service tax, central sales tax, excise duty and security transaction tax while at the State level it includes VAT or sales tax, octroi, state excise, property tax, entry tax and agriculture tax. These taxes lead to increased tax burden on the Indian products affecting the prices and sales in the domestic as well as international markets.
How will GST be a remedy?
Remedy to the above scenario of multiple taxes and its cascading effect which is a burden on common man is GST. The framework of proposal has dual GST which means it will have a federal structure. GST will basically have three kinds of taxes namely Central, State and one called integrated GST that will help to tackle inter-state transactions. Under the current GST tax reform, all forms of supply of goods and services like transfer, sale, barter, exchange and rental will have a CGST and SGST.
What is the need for GST?
One can explain the impact of cascading taxes with an example. Say A sells goods to B after charging sales tax, and then B re-sells those goods to C after charging sales tax. In this case while B was computing its sales tax liability, it also included the sales tax paid on previous purchase, which is how it becomes a tax on tax. This is also referred to as taxes on taxes. This is where the need for GST arises to do away with the phenomenon.
What are the challenges in the implementation?
India is adopting a dual GST, namely the Central GST (CGST) and state GST (SGST). The main hurdle in the implementation will be the coordination among different states. The Centre and States will have to come to consensus on the uniform GST rates, inter-state transaction of goods and services, infrastructural requirements to implement the new tax reform, all of which needs to be worked upon for the smooth transition into GST pattern.
Other factors to be considered:
Since GST is a destination based tax, there should be clarity on where the goods are going. Proper methodology should be chalked out as it would require proper management in terms of services provided.
There has to be uniformity in the implementation of GST in all states at the same time and the same rates or else it would be difficult to comply with the law provisions.
Advantages of implementing GST:
Introduction of GST is considered to be a significant step in the reform of indirect taxation in India. Amalgamating several Central and State taxes into a single tax would help mitigate the double taxation, leading to a common national market. From the consumers point of view, the advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%.
GST will bring in transparent and corruption-free tax administration, removing the current shortcomings of the supply chain owing to the multi-layered policies. GST is not only investor or business friendly but also consumer friendly. GST is the need of the hour and any hindrance to its enactment is clearly unjustified and not in national interest.
Critics argue about the feasibility of implementing GST. But one should always remember that there is no reform that is perfect. It is important that we start with the current bill and gradually improvise the same in due course.
Smart Financial Adviser, Kuber Mindz advices everyone to learn about GST and attain financial literacy helping one to be confident in terms of financial awareness. A person can have a better financial future if he is well aware of the correct procedure of financial planning.
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