By now everyone knows what is GST. GST was introduced to make India one nation, one market and one tax. So these are the three major objectives that have been achieved by introducing this tax reform.
It was a long-awaited move by the government of our nation to impose GST. The transition from the previous indirect tax regime of Central Excise, State VAT and Service Tax to this single indirect tax regime positively impacted our economy and citizens in many ways. But there were many hurdles to be crossed to implement such a vast reform. However, the positive GST impact on the Indian economy has made it worth the effort. See more.
The major subcategories of GST include:
CGST- collected by the central government for interstate sale of goods and services
SGST- collected by the state government when the sale involves just one state
IGST are shared by both centre and states since these deal with goods and services that originate in one state and then move to another
Now that we have an introduction to GST lets take a look at some of its positive effects:
Simpler process
With the concept of GST, it has become much easier to calculate and pay taxes.
Till now, we had a complex taxation structure, with different kinds of taxes based on commodities, like income tax, import duties sales tax etc. At times this would lead to the overlapping of taxes and confusion for the consumer about how much amount he should pay as taxes for his purchase. With the implementation of GST, such issues will be resolved and there will be no need for separate accounting and filing for various kinds of duties levied by various authorities. The GST is also expected to reduce paperwork, checking and corruption.
Allows to make prices globally competitive
GST, which is an indirect tax, will result in the reduction of the total tax burden on fertilizers and petrochemical products. This will make Indian products more competitive in the global markets. Since it is a single nationwide indirect tax, there will be no cascading of taxes leading to an effective rate of taxation that is lower than the existing ad valorem system of taxes.
Rewarding for small and medium enterprises
Small and medium enterprises (SMEs) are the backbone of our economy. They are responsible for employment generation, which is critical to our country's growth. GST has been created keeping this in mind. For small and medium-sized business registered under the composite scheme of GST, the tax payable is dependent on the annual turnover.
Promotes inter-state movement of goods
It will standardize business practices throughout India by eliminating state-wise differences in taxation and other regulations.
Promote ready-to-move property over under-construction real estate
Till now, buyers of under-construction property were subject to two taxes: one was VAT, which would be levied on the builder's commission and cost of building materials; and the other was service tax, levied by the government. However, buyers of completed properties did not have to pay any additional tax.
The GST regime has changed this. The government has given an option to developers to pass on these taxes (VAT and service tax) to buyers. This would mean that those buying under-construction properties would now have to bear these two additional taxes while buying ready-to-move homes will attract only a single tax, GST.
This is likely to bring down demand for under-construction properties as buyers would rather buy completed ones from developers who pass on GST.
