The Wednesday of 3rd Aug 2016, a day when Rajya Sabha finally took the big step in, by passing the GST bill in India, after a period long wait and arrays of debates and discussions over it. GST is the biggest transformation in tax reforms India has seen in years and has left everyone, from a common consumer to business entrepreneurs, curious over what changes it may bring upon.
So let us dig in further, beginning with how GST is different from VAT
GST and VAT:
VAT, abbreviated for Value Added Tax, is a tax that the State government levies upon the local sales, with the percent tax differing form state to state. Though VAT has been designed with a concern to minimalize the cascading effect, the business entrepreneurs still have piles of additional taxes and tax on taxes such as Central Sales tax, Excise, Octroi, etc.
• Vat is eligible for the sales within the state
• Every state has its own compliances
• It is applicable for goods only.
Now with GST in action, the very first change it brings upon is the shift of base from state to central government, which means central government would be managing and collecting tax revenue henceforth. this not only centralizes taxation reforms but also provides a national market for business entrepreneurs to grow.
- GST is a hassle-free replacement for VAT, CST, Service tax etc.
- Better control over inflation
- Reduction in consumer pricing
- Reduction in state government revenue
- Uniformity in national tax reforms
Thus, GST can probably show few good signs for consumers and a great time for SMBs to hit the national market. Having said that, let us have a look how GST can effect business in India
Benefits of GST in India:
• Hassle free tax and compliances management
• Better SCM and Distribution in absence of any additional taxes like Octroi
• Reduced manufacturing production, better profit margin
• Availability of national market, with one single tax.
To conclude with, the effect of GST bill can only be seen in the years to come, depending upon co-operation from states, adaptability of businesses and skills of the working staff. Until then, it is just the best foot forwards, to provide the nation a leading leap in economic development.
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