GST has been around for a while now and is no longer an alien concept. Let’s read on to know how it has affected the common man’s pocket!
The journey of Goods & Service Tax (GST) started in the year 2000 by Prime Minister Atal Bihari Vajpayee when he set up an empowered committee. Post various discussions, amendments in the Constitution Bills, framing related laws & modifications to Acts, the roll out date of 1st July 2017 was announced by the Union Finance Minister. This was post the 9th GST Council Meeting held on 16th January, 2017 in New Delhi.
Our honourable Prime Minister Mr. Narendra Modi announced the implementation of Goods & Service Tax (GST) by summarising following points.
Across India through all States & Union Territories, Central Tax, State Tax & various related taxes on different types of commodities & services combined to a sum of 500.
To have One Nation One Tax ideology, we should shred all the various taxes
Introduction of GST will achieve the mentioned ideology.
GST is a consumption tax based on the credit invoice method. Here, the value addition will be taxed at each stage with a smooth flow of credit along the supply chain.
What is GST?
In a layman’s term, GST is a single form of Tax which will be applied throughout the country, replacing a number of other taxes levied by Central and State Government. Eventually, this shall reduce the manufacturing cost and create a common market barring the boundaries of various states.
GST established progressivity through multiple rate slabs where products consumed by an elite class of consumers will have a higher tax rate, whereas on mass consumption items, lower rate of tax will be applied. GST has been rolled out in a systematic and fazed manner to absorb the anticipated risk of higher inflation and reduction in growth rate.
Effect of GST
The overall effect of any changes in the tax related policies will be on Common Man, as directly or indirectly, it’s a common man who is affected by such changes. The common man referred here is the final consumer of goods as well as the small traders and service providers who are directly affected by the implementation of the GST.
Most of the agriculture products are under zero rate. As mentioned earlier, the rate slab of the GST has a lower impact on mass consumption items which come under 0% or 5% rate. Around 60% of goods & services fall under 12% & 18% slab. The number of items on which 28% GST rate is applicable was reduced from initial 228 to 28.
Benefits of GST
Let’s see what are the benefits of GST received to a common man so far:-
Reduction in cascading of Taxes: As per earlier tax system, the common man was paying Tax on Tax due to multiple layers of taxes & cess. But due to single GST, a lesser burden of tax will be imposed on goods & services and prices will be reduced to that extent which will have a benefit to the final consumer.
The overall reduction in Prices: The reduction in tax effected the prices adversely. Anti-profiteering provision was made to check if proper rates are being levied on goods and services and prices are properly quoted. Profit margin is not inflated by avoiding passing of the reverse credit benefit to end user. Thus, any reduction in the rate of tax should have been passed on to the recipient by way of reducing prices.
Common National Market: Abolition of multiple taxes leads to common national market and avoidance of double taxes which also leads to the free flow of goods. So, the common national market is opened for inter-state transfers of goods and services with a lesser and uniform tax rate. Various barriers of interstate transactions like check-posts have been removed which saved a lot of time involved in moving the goods across states and transactions cost. The benefit of which again goes to the cost of products and inadvertently to consumers.
Benefits to Small Taxpayers: Tax payer with an aggregate turnover of up to Rs. 20 Lakhs (in some cases Rs. 10 Lakhs) in a financial year will be exempted from taxation. (The aggregate turnover of the individual will be calculated as the total value of all taxable as well as non-taxable goods, tax-exempt goods and even all exports of services and goods excluding taxes, i.e. GST). The aggregate turnover for tax purposes will be calculated on an all-India basis.
Simplified Tax Regime: Continuous efforts are being taken to make the GST regime simple by keeping a tab on rate structure and impact of it on various goods and services. Revisions are being made in tax rates to manage the cash flows. E-way bill was introduced for inter-state movement of goods and later for intra-state movement in a staggered manner.
Exports to be zero rated: Export of goods and services are zero rated along with SEZs whose supplies are also eligible for zero rates. Integrated tax can be paid with the benefit of zero rating or bond or Letter of Undertaking can be obtained without payment of integrated tax under.
Curb Black Money: A unified tax regime will lead to less corruption. Proper check will be kept on the kaccha bill system followed by traders and shopkeepers. The connection of seller and buyer is weaved in such a way that one cannot skip declaring the transaction. The end result i.e. tax, cannot be evaded by such entities and tab on black money is possible.
There surely are some negative impacts of the GST as well. Some of them are compliance burden, higher service costs, software issues and complication in filing returns, etc. The GST Council and the Government are continuously trying to curb the mentioned negative impact which will help in streamlining the GST process and make the system efficient.
Though the start was quite jittery and there had been many developments afterwards in the road of implementing, GST that is a single tax system, will not work in India. However, post completion of two years of the implementation, people have more-or-less accepted the concept of GST.
Overall, the concept of GST leaves a positive impact that would help to boost the Indian economy along with the financial growth of common man, but the implementation needs to be smoothened for the same. The entire process of input credit needs to be streamlined and that is quite a mammoth task. However, GST surely is the way ahead for India, at least for the time being. Nonetheless, only time will tell how it impacts the growth of our nation.