Five things no one will tell you about GST

Five things no one will tell you about GST

- in Analysis, Special Post
200
0

Goods and Services Tax (GST) is being put to multifarious ways to scrutiny in which many good things about the landmark tax regime are being either ignored or not highlighted properly. There are innumerable benefits of GST with minimal nor harm, but the five best among these benefits are rarely talked about. First, GST is going to drastically reduce the cost of manufacturing in India because of input tax credits and no multiplication of tax. A vibrant manufacturing sector means more jobs, which will further improve the demand sentiments, thus giving due boost to supply side.

Second, GST will improve cash flow management as transactions are required to be settled at a faster pace. There is quick provision for refunds. Third, since this is one country and one tax, now there is no need to pile up stocks. This is already improving the effectiveness of working capital management. All this means that the cost of manufacturing goods in India is going down, opening up doors for more consumption and exports.

Fourth, unlike other countries where GST was brought in, the new tax reform in India is leading to easing out inflation, paving the way for lending rate cuts by the Reserve Bank of India (RBI). This means that easy availability of funds for doing the business. Fifth, if the demonetisation led to improvement in formal employment numbers and direct tax numbers, the GST will increase indirect tax collections. Both of them are pushing expansion of GDP by at least one per cent in
next two years. Purely because of input credit culture will push various businesses to come in tax net.

GST is one indirect tax for the whole nation, which will make India one unified common market. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off
benefits at all the previous stages.

A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns and payments and so on will be available to the taxpayers online, which would make compliance easy and transparent. GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST will make doing business in the country
tax neutral, irrespective of the choice of place of doing business.

A system of seamless tax-credits throughout the value-chain, and across boundaries of states will ensure that there is minimal cascading of taxes. This will reduce hidden costs of doing business.
Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry. GST will result in better tax compliance due to a robust IT infrastructure. Due to multiple indirect taxes being levied by the Centre and state, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country were laden with many hidden taxes. Under GST, there is only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

You may also like

New ILO-SPREP partnership to promote green jobs as a driver of sustainable development in the Pacific

Suva : The International Labour Organization (ILO) and