How Goods and services tax plays a major role in Indian Economy?

1
How Goods and services tax plays a major role in
Indian Economy?

• In this blog, we have discussed about the goods
  and services tax impacts and roles played by them
  in the Indian economy.

2

• Chiefly, Goods and service tax is a
  transformation designed to create an ecosystem
  where free and fair competition can flourish. The
  state and Centre in agreement decided to pool in
  their resource and sovereignty to create this
  economic consolidation for the common goal of
  economic prosperity. Indias first federal
  institution, the GST reforms does several
  multiple arbitrary tax schemes, making it easier
  to administer taxes while making revenue
  collection more efficient.
• When state and Centre have independence to charge
  taxes based on their preferences, the entire
  system goes unfair and the movement of goods also
  becomes difficult. The Goods and Services Tax is
  another such undertaking that is expected to
  provide the needed stimulant for economic growth
  in India by transforming the existing base of
  indirect taxation towards the movement of goods
  and services.

3

• GST is also expected to eliminate the effect of
  taxes. India planned to play an important role in
  the world economy. The hope of GST introduced is
  high not only within the country, but also within
  neighboring countries and developed economies of
  the world.

4
Goods and services tax

• The introduction of Goods and Services Tax in
  India is on high. The Constitution Amendment Bill
  is likely to replace existing multiple indirect
  taxes. Lok Sabha has already passed this Bill.
  The current indirect tax system is a major
  weakness in Indias economic growth and
  competitiveness. Tax barriers in the form of CST,
  entry tax and restricted input tax credit have
  uneven Indian market.
• Removal of tax barriers on introduction of
  uniform GST across the country with seamless
  transaction, will make India a common market
  leading to economy of scale in production and
  efficiency in supply chain. It will expand trade
  and commerce.
• Moreover, GST will have positive impact on
  organized logistic industry and modernized
  warehousing. GST provides the ease of doing
  business in India. Integration of existing
  multiple taxes into single GST will significantly
  reduce cost of tax compliance and transaction
  cost.

5
Benefits of GST to the Indian Economy
6

• Removal of indirect taxes such as VAT, Service
  tax, CST, CAD, SAD, and Excise.
• An easy tax policy compared to current tax
  structure.
• Removal of cascading effect of taxes i.e. removes
  taxes on tax.
• Reduction of manufacturing costs will lower
  burden of taxes on the manufacturing sector.
  Hence prices of consumer goods will be lesser.
• Moreover, GST will Lower the burden of taxes on
  the common people i.e. public will spend less
  money to buy the same products that were costly
  earlier.

7

• In essence, increased demand and consumption of
  goods.
• Increased demand will lead to increase supply.
  Hence, this will ultimately rise the production
  of goods.
• Controls the circulation of the black money.
• Boosts the Indian economy in the long run
  process.
• Consequently, these things are possible only if
  the actual benefit of GST are passed on to the
  final consumers. There are several other factors
  such as the sellers profit margin, which
  determines the final price of goods. Moreover,
  GST alone will not determine the final price of
  goods.

8
How will GST impact the Indian Economy?
9

• Tax burden on producers will be reduced and
  fosters growth through more production.
  The current taxation structure prevents
  manufacturers from producing to their optimum
  capacity and retards growth. However, GST will
  provide solution to this problem by providing tax
  credit to the manufacturers.
• There are different tax barriers such as check
  posts and toll plazas, lead to the wastage of
  unpreserved items being transported. The taxes
  will be higher in the case of buffer stock and
  warehousing costs. A single taxation system will
  eliminate this roadblock.
• Transparency in the system will helps the
  customers know exactly how much taxes are being
  charged and on what base.

10

• In addition, GST will add government revenues by
  extending the tax base.
• GST will provide acknowledgment for the taxes
  paid by producers in terms of goods or services.
  This is expected to encourage producers to buy
  raw material from different registered dealers
  and bring more vendors and suppliers under the
  view of taxation.
• GST will remove the value- added tax applicable
  on exports. Hence, great demand for Indian
  products in foreign markets will increase on
  account of lower costs of transaction.

11
WHAT WILL GET COSTLIER ACCORDING TO THE GST RULE?

• The following will costlier as per the GST rule
• Accommodation in hotels will be 28 GST where the
  room tariff will be more than Rs.7, 500 per unit
  per day
• Air-conditioned restaurants serving or not
  serving liquor will charge GST at the rate of
  18.
• Renting of a motor car will charge GST at the
  rate of 18
• Under-construction immovable property being
  flats, commercial buildings, etc., will attract
  GST at the rate of 18 after allowing deduction
  of land value to the extent of one-third of the
  total amount of immovable property
• Commercial renting of immovable property will be
  charge GST at the rate of 18
•   As per the former Service tax regime, the taxes
  was 15, GST on commission or fees paid to
  facilitating agents or banks will be taxed at 18
  at present.

12
THE RATE OF GST ON OTHER GOODS

• The rate of GST is 18 for soaps and 28 on
  washing detergents.18 GST for movie tickets that
  cost less than Rs. 100 and 28 GST on tickets
  costing more than Rs.100 and 28 on commercial
  and private vehicle and 5 GST on ready-made
  clothes. The rate on under-construction property
  booking is 12.
• Some industries and products were excused from
  paying taxes. They are dairy products, fresh
  vegetables fruits, meat products, products of
  milling industries, and other groceries and
  necessities. Check posts across the country were
  stopped to ensure free and fast movement of
  goods.

13
GOODS KEPT OUTSIDE THE GST 

• Alcohol for human consumption, not for commercial
  use.
• Petrol and petroleum products (GST will apply at
  a later date), i.e., petroleum crude, high-speed
  diesel, motor spirit, natural gas, aviation
  turbine fuel, etc.
• WHAT IS GST RETURN?
• GST return is a document that is filed by the
  experts, who are registered under GST Act. A GST
  Return includes the details such as
• Sales made by the registered dealer
• Purchase made by the registered dealer
• GST output on sales of goods and services
• Input Tax Credit or ITC on purchase of goods and
  services

14
SCENARIO BEFORE THE IMPLEMENTATION OF GST

• Before implementation of GST separate accounts
  are required to be maintained for excise, VAT,
  CST and service tax. Apart from accounts like
  sales, purchases, and stock, the following
  accounts are separately required to be
  maintained
• Excise Payable (for the manufacturer)
• CENVAT Credit (for the manufacturer)
• Output Vat A/c
• Input Vat A/c
• Output Service Tax
• Input Service Tax
• CST A/c for interstate purchases and sales
• Service Tax A/c

15
SCENARIO AFTER IMPLEMENTATION OF GST

• Under GST all the above taxes are subsumed into
  one tax. Thus following accounts are required to
  maintain in addition to purchases, sales, and
  stock
• Input CGST a/c
• Output CGST a/c
• Input SGST a/c
• Output SGST a/c
• Input IGST a/c
• Output IGST a/c
• Electronic Cash Ledger should be maintained on
  Government GST portal to pay GST.
• While the number of accounts to be maintained are
  more but through accounting and record keeping
  you will find it easier to maintain the books of
  accounts and comply with GST provisions.

16
Conclusion

• Thus, the introduction of the Goods and Services
  Tax will be a very notable step in the field of
  indirect tax reforms in India. By unifying large
  number of Central and State taxes into a single
  tax, GST is expected to double taxation and make
  taxation overall easy for the industries. The
  most beneficial will be in terms of reduction in
  the overall tax burden on goods and services for
  the end customers.
• Moreover, introduction of GST will also make
  Indian products competitive in the domestic and
  international markets. The GST will be easier to
  administer because of its transparent character.
  Once the proposed taxation system is implemented,
  this greatly promises in terms of sustaining
  growth for the Indian economy.