1st July 2017 will continue to be a landmark date for years from now! The implementation of GST, or the Goods and Services Tax by the Indian Government on this date has made it memorable. If you are wondering ‘What is GST?’, then read on.
While some of the people considered it to be a boon for the Indian economy, the others thought it was a burden for the common man. However, whether we support it or despise this tax system, GST is here to stay and has already become a part of our daily life.
What is GST?
GST (Goods and Services Tax) is a single tax on a product, right from the manufacturer to the consumer. For the consumer, this means that he will have only to pay GST charged by the last dealer in the supply chain. For businesses, it means 100% online compliance and uniformity of tax structures.
According to government’s observation and policy formulation, GST encompasses standard taxation on all types of goods and services. The five tax slabs or categories are 0%, 5%, 18%, 12%, and 28%. If Finance Minister Arun Jaitley’s statements are anything to go by, GST will reduce opportunities for tax evasion, strengthen the economy, and reduce inflation. His announcement on 6th October about bringing down the number of filings from 3 in a month to 1 GST filing in a quarter too is a positive step to remove the burden of compliance from the common man’s shoulder.
Here are the ten important aspects you should know about this new tax system:
- Tax reductions
The presence of input tax credit helps businesses and general buyers. The profits and benefits can be passed on to the general consumers directly. GST has an anti-profiteering clause, and that’s what makes it happen.
- Paying final tax points
When you are buying goods or taking services, you will have to pay taxes implemented at the end of the supply chain. Quite naturally, the burden on general consumers reduces to a great extent!
- Petrol and Alcohol are GST-free
The GST Council has exempted alcohol and petrol as of now. However, the council promises to levy GST on these items quite soon.
- Impacting the service sector
The service sector might have to face critical consequences as the service tax of 15% has been replaced by GST of 18%. In the long run, this tax might prove to be beneficial for consumers. But, as of now, service businesses will have to bear the brunt of the hike.
- Tax burden to vanish
GST won’t leave impacts on over-inflation. According to RBI, tax burdens on individuals will reduce with time. As time passes by the immediate effects might vanish.
- Stock market news
GST might bring good news for stock market investors, as some of the enterprises are expected to hit new highs. The stock market needs some time to incorporate GST into their existing structure. That might reduce short-term corporate earnings, but will improve profits in the long run.
- Manufacturing costs revised
Manufacturers and product developers will have the opportunity to revise their costs and prices. GST will surely impact their pricing structures thus creating the need for revision.
- Small business advantages
Businesses and companies with a yearly turnover of less than Rs 20 lakhs will get exemptions from GST. It’s of paramount significance for them, as these businesses will have the opportunity to maximise profit margins.
- Easy and smooth business decisions
If you are an entrepreneur, GST will give you exemptions from paying multiple taxes. That’s surely a huge benefit for small business owners and first-time entrepreneurs.
- Tax compliance
The Goods and Services Tax reduces tax evasions, and that’s true. Every organisation and individual will have to pay taxes for every service and goods they opt for.
These are some of the most crucial and imperative tips associated with GST. They will surely help you understand the tax system perfectly and understand ‘What is GST?’!