4 Major Benefits or Advantages of GST
Posted on: 2017-10-17 05:43:04
Goods and services tax (GST) is one of the biggest fiscal reforms in India ever since Independence. It is expected that this indirect tax would have a major effect on businesses of all sizes, big as well as small. GST is expected to be levied on all goods and services and will take up the mantle now vacated by the indirect taxes of yore. This includes taxes such as excise tax, value added tax (VAT), and service tax to name a few. It is expected to have several advantages for Indian economy. Look over here, the four benefits of goods and services tax (GST).
1. Removal of cascading effect of taxes
This is expected to be an important benefit of the GST tax regime. It will significantly do away with the cascading effect that the previous indirect taxes had. In layman’s terms the phrase cascading effect of tax means one tax upon another. In the present regime the service tax that has been paid on the input services cannot be set off with respect to the output VAT. In GST the tax payer would be able to avail input tax credit without any problem whatsoever. This facility will be available across all goods and services. In the end this would reduce the tax burden applicable for the end user.
This will do away with the cascading effect. It is expected that this would really benefit industries where both products and services are involved. Examples of such businesses would be the various restaurants and eateries.
2. Greater tax breaks for smaller organizations
It is also expected that GST would make registration really easy. The registration limit for excise tax was INR 1.5 crores, and for VAT in most states across India the figure was at least INR 5 lakh. For service tax this figure went up to INR 10 lakh. The registration limit for GST is INR 20 lakh. In the states located in northeastern India this limit has been fixed at INR 10 lakh.
The present VAT structure makes it necessary for any company with an annual turnover of more than INR 5 lakh to pay the tax. The rates are however different across states. As far as service tax is concerned any company with a yearly turnover of at least INR 10 lakh would have to pay the tax. In GST this limit has been taken up to INR 20 lakh. It is expected that this would significantly benefit many small and medium industries.
3. Small businesses to be benefited by composition scheme
The administrators have also come up with an alternative programme of lower taxes that is expected to benefit the smaller companies that earn between INR 20 lakh and INR 50 lakh a year. This scheme is known as the composition scheme and would benefit these entities by reducing the tax rate applicable to them. It is being proposed that the limit be increased to INR 1 crore as compared to the earlier turnover threshold of INR 75 lakh a year. This is expected to be of significant benefit for a number of small businesses across the country as well.
4. Online procedure becomes much simpler
The whole process of GST is expected to be much simpler compared to other indirect taxes. This includes processes such as registration, filing of returns, and payment of the tax, all of which have to be done online. Now, there is no longer the need for a startup to do the rounds of a tax office so as to get registered for various taxes. The number of compliances has come down as well. At present, there are other indirect taxes such as excise tax and VAT that have their own compliances and returns. GST is expected to unify all the different compliances and returns and make the entire process much simpler and, thus, easier.
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