Introduction
The Goods and Services Tax (GST) has emerged as a game-changer in India's taxation system and has been one of the main highlights of the BJP rule. It has revolutionized the way goods and services are taxed. Enacted on 29th March 2017 and implemented on 1st July 2017, the GST Act replaced a plethora of indirect taxes, such as excise duty, VAT, service tax, and more, streamlining the taxation structure and bringing about a host of benefits for businesses, consumers, and the overall economy.
Elimination of Cascading Effect
One of the most significant advantages of GST is the elimination of the cascading effect of taxes, commonly known as 'tax on tax.' In the pre-GST era, various taxes were levied at different stages of the supply chain, leading to inflated tax costs for businesses and consumers alike.
The introduction of the input tax credit mechanism under GST allows businesses to claim credit for taxes paid on inputs, preventing double taxation and ultimately reducing the final price of goods and services.
Higher Registration Threshold
GST brought about a substantial increase in the registration threshold, providing relief to small businesses. Under the previous tax structure, businesses with relatively low turnovers were burdened with VAT, service tax, and other taxes.
The GST regime raised the threshold to Rs. 20 lakh, exempting numerous small traders and service providers from the tax burden, thereby reducing compliance costs and administrative complexities.
Key Features
Some of the key features of GST are;
Dual GST Model: GST is implemented through a dual model, comprising Central GST (CGST) levied by the Central government and State GST (SGST) levied by individual states. Union Territories also levy Union Territory GST (UTGST).
Destination-Based Taxation: GST is a destination-based tax, meaning that the tax is collected at the point of consumption rather than at the point of origin. This encourages a more equitable distribution of tax revenue among states.
Tax Slabs: GST has multiple tax slabs to categorize goods and services based on their nature and usage. The main tax slabs include 5%, 12%, 18%, and 28%, with some essential items attracting a lower rate or being exempted.
Input Tax Credit (ITC): One of the significant benefits of GST is the availability of Input Tax Credit. Businesses can claim credit for taxes paid on input goods and services, which helps avoid the cascading effect of taxes and promotes a more transparent and efficient tax system.
GST Council: The GST Council is a constitutional body that consists of representatives from the Central and State governments. It is responsible for making decisions on various aspects of GST, including tax rates, exemptions, and amendments to the law.
GST Network (GSTN): The GSTN is the IT backbone of the GST system, facilitating the online filing of returns and providing a common and shared IT infrastructure for the Central and State governments.
Increased Compliance and Transparency: The transparent and digitized nature of GST processes reduces opportunities for tax evasion. Online record-keeping and reporting mechanisms enhance transparency, making it easier for tax authorities to track transactions and detect discrepancies.
Promotion of E-commerce: GST facilitates the growth of e-commerce by providing a standardized tax treatment for online transactions. It eliminates the need for multiple tax registrations in different states, making it easier for e-commerce businesses to operate seamlessly across the country.
Smoother Interstate Transactions: With the implementation of GST, interstate transactions have become smoother due to the elimination of entry taxes and other state-specific levies. This has facilitated the movement of goods across state borders.
Common Procedures and Portal
The GSTN provides a common online platform for all tax-related activities, ensuring consistency and ease of use for taxpayers. Automation of processes like registration, return filing, and payment reduces manual efforts and errors while also ensuring that the average Indian now pays his taxes without worrying about the multiple visits to IT offices.
Certain sectors like healthcare, education, and food grains are either exempt from GST or subject to reduced tax rates, ensuring affordability and accessibility of essential goods and services.
Anti-Profiteering Measures
The establishment of the National Anti-Profiteering Authority ensures that businesses pass on the benefits of reduced taxes and input tax credits to consumers, preventing unfair pricing practices and supporting consumer interests. It has also enhanced transparency in the tax system and provided a better audit trail. This has led to increased accountability among businesses, making it more challenging for them to engage in tax evasion practices.
Challenges
Despite its numerous advantages, GST also faces some challenges; some of them being the multiple tax slabs to comply with and the issue of compensation for revenue loss with states. Through collaborative efforts by the government and the people, most of these challenges have been overcome.
GST and Digital India
The move towards a digital economy involves a shift towards digital payments. GST encourages transparency in transactions, making it easier to track and monitor economic activities. This aligns with the goals of Digital India by promoting a transparent and accountable financial ecosystem. As it becomes easier for Indians to access different services from their phones, more and more people are brought on board the Digital revolution and GST is just one of the many gears that turn the wheels of Digital India.
Conclusion
In conclusion, the Goods and Services Tax has ushered in a new era of taxation in India, bringing about numerous benefits that extend across businesses, consumers, and the economy as a whole. From the elimination of the cascading effect of taxes to the simplification of compliance processes, GST has proven to be a transformative force, fostering economic growth, promoting ease of doing business, and enhancing the competitiveness of Indian businesses in the global market.
Despite its many hits, it also has some misses. Moving forward, it is important to address these issues head on to ensure a smoother taxation experience for the public. The continued success of GST relies on the collaborative efforts of the government, businesses, and the broader community in embracing and optimizing the opportunities presented by this landmark tax reform.