-Deepak Bommisetty
The implementation of GST will lead to the abolition of other taxes such as Octroi, Central Sales Tax, State-level Sales Tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services and more, thus avoiding multiple layers of taxation that currently exists in India.
However, there is a lack of awareness about how GST will impact their day-to-day activities.
What is GST?
Goods and Services Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain. The system allows the set-off of GST paid on the procurement of goods and services against the GST, which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain.
Experts say that GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate.
Why GST?
Under GST, the taxation burden will be divided equally between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.
It is expected to help build a transparent and corruption-free tax administration. GST will be levied only at the destination point, and not at various points (from manufacturing to retail outlets).
Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.
How will it benefit the Centre and the States?
It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden between manufacturing and services.
What are the benefits of GST for individuals and companies?
In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.
(The author is the CEO of SV Technologies, Nellore, Andhra Pradesh. The views expressed in this article are those of the author and do not represent the views of Channel Times or any of the websites managed or operated by Trivone Digital Services)