The Goods and Services Tax (GST) is undeniably one of the biggest fiscal reforms in India. Implemented in July, it has been active for two months now, and despite that, a lot of confusion still masks the market regarding its process. However, there was a reason why the GST came into force. It involved some forethought, a planned work structure and a series of advantages which, apparently, would improve the fiscal position of India in the long run.
Hereafter, we list down 5 major advantages of the incorporation of GST in the Indian taxation system:
• Benefits Every Section of the Society
GST, as a tax reform, benefits not just one but all the sections of the market- be it consumers or manufacturers. GST is structured to lower the prices of most of the commonly used goods, thereby benefiting the consumers. This lower price, in turn, increases the demand for these products, thereby expanding the market for the manufacturers and hence their revenues.
• Brings In Transparency and Boosts the Economy
The Goods and Services Tax is levied at all the levels of the supply chain and hence, reduces the scope of any crafty behaviour. It makes it easier for the government to keep track of the taxes paid at each level and their accuracy. Also, it makes it difficult to hide the income from sales and hence, ensures a better collection of taxes, thereby improving the fiscal position of the economy.
• Removes Cascading Tax Effect
In the earlier Value Added Tax (VAT) regime, a number of taxes were collected at numerous levels which resulted in taxes being charged at subsequent levels. GST ensures that this does not happen as taxes already paid at the previous stage are set off with tax credit at the next level.
• Improves the Balance of Payments
Under the previous VAT system, many refunds did not get processed due to a distortion in the indirect taxes between the Centre and the State Governments. However, under GST, the exports are zero-rated in entirety, which, hopefully, will improve the position of Indian goods in the international market, thereby improving the balance of payments of the country.
• Technology Driven System
The new system of taxes is largely technology driven. The payments, the registrations and every single process related to taxes is done online. This will not just reduce the possibilities of errors but will also give rise to speedy decisions and better error detection. Again, it will also make it easier to keep track of the taxes collected at the different levels.
Thus, we see that the benefits of the Goods and Services Tax are focused mainly on the improvement of the fiscal position of the Indian economy. This new tax reform is bound to establish a better ground for India in the International market and improve the overall economic situation of India.
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