GST benefits: Know who gains what- Industry, government, consumers

Zee Media Bureau

New Delhi: India moved a major step closer towards a unified goods and services tax regime across the country, with the upper house of Parliament passing the relevant Constitution amendment bill on Wednesday, in what is seen as the most radical indirect tax reform since independence.

 

The 66-year-old Constitution, which gives power to Centre to levy taxes like excise, and empowers states to collect retail sales taxes, was amended though the 122nd Constitution Amendment Bill.

The benefits of GST can be summarised  as  under:

For business and industry

-Easy  compliance: 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,  payments,  etc.  would  be  available to the taxpayers online, which would make  compliance easy and transparent.   

 

-Uniformity of tax rates and structures: 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  would  make  doing  business  in  the  country  tax  neutral,  irrespective of the choice of place of doing business.

-Removal of cascading: A system of seamless tax-credits  throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes.  This  would  reduce  hidden  costs  of  doing business.  

-Improved  competitiveness: Reduction  in  transaction costs  of  doing  business  would  eventually  lead  to  an  improved competitiveness for the trade and industry.

Gain to manufacturers and exporters: The subsuming  of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and  phasing out of Central Sales Tax (CST) would reduce the  cost  of  locally  manufactured goods  and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to  Indian  exports.  The  uniformity  in  tax  rates  and  procedures across the country will also go a long way in reducing the compliance cost.

For Central and State Governments

-Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would  be  simpler  and  easier  to  administer  than  all other indirect taxes of the Centre and State levied so far.

 

-Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to  the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built  mechanism  in  the  design  of  GST  that  would
incentivize tax compliance by traders.

-Higher revenue efficiency: GST is expected to decrease the  cost  of  collection  of  tax  revenues  of  the Government, and will therefore, lead to higher revenue efficiency.

For the consumer

-Single and transparent tax proportionate to the value of goods and services: 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 today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

-Relief in overall tax burden: Because of efficiency gains  and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.