The basic benefit is to know that it creates a single, undivided and cooperative market to make the economy much stronger and powerful. The GST is a significant breakthrough which paves all the inclusive indirect taxes for reforming the India.
Make in India:
- It helps to create a unified common national market in India which boosts for the foreign investment and “Make in India” campaign.
- It finally prevents all the cascading taxes and input tax credit for all the supply of goods and services in each and every stage of supply.
- Ultimate thing is, it eradicates all the poverty and generates more employment offers and the financial resources.
- It boosts export and the manufacturing activity, more employment and increases GDP (Gross Domestic Product) which leads to considerable economic growth.
- Improving overall investment climate in the country helps to naturally develop each and every state.
- Neutralisation of taxes on exports will create more competitions to the international market and give boosts to the Indian market.
- Harmonising all the laws, procedures and the rates of tax.
- Average tax burden on companies going to be reduced which clearly indicates that lower the prices, more in consumption. The production rate will be getting more on industries. This will create an India as a “Manufacturing Hub”.
Ease of doing Business:
- Simpler in tax regime with fewer exemptions.
- Reduction in the multiple taxation will leads to uniformity and simplification.
- Reduce the compliance costs which mean that, there will be no need to maintain huge records. Lesser investment in resources and manpower for maintain records.
- Simplified and automated procedures for various processes such as returns, registration, refunds and tax payments etc.
- All interaction will be only carried out through GSTN portal. So, less interaction between the tax administrators and the tax payers.
- Timelines will also be provided for important activities like registration and refunds.
- Electronic matching of ITC across India makes the process more transparent and accountable.
- Common procedures for taxation in the terms of refund of taxes, registrations, uniform formats of tax return. Common base for classification of goods or services which tends to greater certainty in the taxation system.
Benefits to consumers and the producers:
- Final price is expected to be lower, since there is a seamless flow of ITC between the manufacturers, suppliers and the service providers. So when it finally reaches to the consumer, it considerably with lower costs.
- It also be expected that the large segments from the small retailers will be either exempted from the tax and with very low tax rates. When purchases from such entities will obviously costs less for the consumers.
- In the GST system, taxes will be levied by the centre and the state at the point of sale. Individuals will do more consumption when the prices are low. More consumption means more production. Then we can see the dramatic growth of companies.
For the Centre and the States:
According to experts, for implementing the GST, India gains $15 billion per year. This is because, it promotes more exports, creates more employment. Eventually it turns up to reduce the burden of tax between the manufacturers and the service providers. So, it will be equally beneficial to both centre and states.
GST Rate Slabs:
The Goods and Service tax levied different kinds of rate structure starting from 0% to 28%. The GST council finalise the four tier tax structure such as 5%, 12%, 18% and 28%. Lower rates will be imposed on essential items and the higher rates will be on luxury items and the demerit goods that would also attract on additional taxes. Service tax will go from 15% to 18%. The services will be taxed at very lower rates such as train tickets. In order to control inflation, the most essential items like foods which are roughly present half of the consumer inflation basket. So the tax will be at the rate of 0%. The lowest rate of 5% would be used for the commonly used items. There would be two standard rates between 12% and 18%, which falls on the bulk of goods and services. Fast moving consumer goods will also be included. Highest tax slab would be applicable to the items which are currently taxing at the rate of 30-31% (excise duty and the VAT).
Ultra luxuries goods, demerit and sin goods would attract a cess for a period of five years and on top of that GST with 28%.
This collection of cess will creates a revenue pool which probably compensates if any loss occurs for the states during in the first five years of implementation of GST.
The Finance Minister said that this cess only for up to 5 years. After that this cess can be lapsable. While the centre proposed to levy a tax of 5% on gold but the final decision was put off. During a press conference minister said that “GST rates on gold will be finalised after approving the tax rates for all items and there will be some idea for revenue projection”.
The principle for determining the rate on each item will be to levy and collect the GST at the rate slab closest to the current tax incidence on it.
GST will subsume the multiple cesses, including swachh bharat cess, krishi kalyan cess and the educational cess. Only the clean environment cess will be retained to fund the compensation.