Introduction to GST and the objectives of implementing this indirect tax.
Taxes form an integral part of a nation’s economy. Without taxes, it would be impossible for a country to function, take up infrastructure development projects, or finance public sector operations. Like Income Tax, taxpayers also pay tax on goods and services that they consume. In India, economists replaced the previous tax-on-tax system with an improved regime known as GST. Keep reading to know more.
The Goods and Service Tax is a type of indirect tax introduced to make India a single unified common market. The GST Act was passed by the Indian parliament on 29th March 2017, and it came into effect on 1st July 2017. GST is a single domestic tax on the supply of goods and services from manufacturers to consumers.
GST has replaced numerous indirect taxes of the previous tax regimes. Implementing a single tax model means that every Indian state abides by the same tax rate for products or services. The Central Government decides the GST rates and policies, and taxpayers need not worry about filing multiple return forms.
In the previous tax-on-tax regime, taxpayers were unable to set off tax credits of one tax against another, also known as the cascading effect of taxes. GST eliminates this effect and allows tax credits to flow across goods and services seamlessly.
Taxpayers can claim tax credit only when the supplier uploads their invoices. This way, the number of individuals claiming tax credits against fake invoices reduces significantly.
By subsuming indirect taxes like entry taxes, the overall productivity of businesses may increase.
As a result of GST, the entire nation is under one and only one tax regime allowing uniformity in processes, tax rates, and laws across India.
All GST registration and filing processes can be done online, thereby encouraging new businesses to register for the GST process hassle-free.
Businesses with annual turnover in the INR 20 Lakh and INR 75 Lakh range are eligible to become beneficiaries of the GST Composition Scheme which reduces taxes on such respective businesses.
The indirect GST tax has eliminated the various cesses and charges we paid on consuming goods and services. The tax rate depends on the product or service consumed and differs based on whether it is necessary or a luxury.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.