In India, the Goods and Services Tax (GST) system went into force on July 1, 2017. The establishment of this tax structure has been one of India's most significant economic changes.

This 'one nation, one tax' reform absorbed most indirect taxes collected at the federal and state levels, resulting in tax administration homogeneity. However, if you've come this far, you're undoubtedly wondering how it can help you.

Let us now look at the benefits of GST. This article will give you an overview of the GST system and its key advantages.

TABLE OF CONTENTS

• What are the components of GST?
• Why GST in India?
• Who is Required to Register for GST in India?
• The Key Benefits of GST in India
• GST Benefits to Common Man in Brief
• FAQs
• Summing Up

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What are the Components of GST?

The following taxes are levied under the Goods and Services Tax:

• State Government Goods and Services Tax (SGST): A tax levied by the state government.
• Central Goods and Services Tax (CGST): A tax levied by the government at the national level.
• Integrated Goods and Services Tax (IGST): A tax levied by the federal government on inter-state supplies of goods and services.

The implementation of GST has had a good impact on the Indian economy. This tax has dismantled the inter-state trade barriers, bringing the economy together in a single unified market.

This type of taxation benefits both manufacturers and traders. End users have also profited substantially from the implementation of the Goods and Services Tax in a variety of ways.

Why GST in India?

The current indirect tax system is fairly complicated. The central and state governments charge a wide range of taxes, including Central Excise Duty, Service Tax, VAT, Purchase Tax, Central Sales Tax, Entry Tax, Local Body Taxes, Octroi, Luxury Tax, and so on.

Each of them is a unique tax with its compliance requirements and provisions. This adds complexity and makes it harder for taxpayers to comply with the law.

The various tax systems are also not integrated, creating several opportunities for tax avoidance.

The Goods and Services Tax (GST) was introduced across India on July 1, 2017, to streamline the tax framework. GST is charged on the provision of products or services, or both (composite supply), and benefits all stakeholders, including citizens, taxpayers, industry, and the government.

For both inter-state and intra-state transactions, the simplified GST regime has uniform tax rates across states. This will encourage compliance and make conducting business easier.

The elimination of rate arbitrage between neighboring States, as well as that between intra-state and inter-state sales, has lessened the incentives for evasion.

Who Is Required to Register for GST?

Every business or organization that buys and sells goods and services is obliged to register for GST. Companies with a yearly turnover of more than Rs.20 lakhs (for service providing) and Rs.40 lakhs (for goods sales) are needed to register for GST.

All businesses that conduct interstate outbound product shipments must additionally register for GST. The same is true for companies such as agents and brokers that make taxable supplies on behalf of other taxable people.

Furthermore, e-commerce sellers/aggregators do not need to register if their total sales are less than Rs.20 lakhs, according to a recent announcement.

The Key Benefits of GST in India

GST also offers a lot of potential for taxpayers in terms of simplifying their business and accounting procedures while also optimizing tax benefits. The only exception is that businesses must be fast and accurate in adhering to the GST Council's processes.

Read on for the primary GST perks that can help you thrive.

1.GST Removes the Tax Pressure Effect

GST is a comprehensive indirect tax that was created to unify indirect taxation. More crucially, it will eliminate the previously observed tax cascading impact.

The cascading tax impact is best summarized as 'Tax on Tax.' To illustrate what Tax on Tax is, consider the following example:

Before the GST regime:

A consultant delivering services for Rs 50,000 and charging a 15% service tax (Rs 50,000 * 15% = Rs 7,500).

Assume he purchases office supplies for Rs. 20,000 and pays 5% VAT (Rs 20,000 * 5% = Rs 1,000).

He was required to pay Rs 7,500 in output service tax without any discount for the Rs 1,000 VAT already paid on stationery.

He has a total outflow of Rs 8,500.

Following GST:

GST of 18% is levied on services worth Rs 50,000 which are 9,000

GST on office supplies (Rs 20,000*5%) is less, about 1,000

Hence, 8,000 is the net GST to be paid.

2.Increased Exemption Limit

The GST Council increased the exemption ceiling for the sale of commodities from Rs 10 lakh to Rs 40 lakh. For the northeastern states, the exemption limit is Rs 20 lakhs.

The exemption limit for service providers is Rs. 20 lakh in all states, except special states, where it is Rs. 10 lakh.

The yearly turnover for availing of the Composition Scheme has been enhanced from Rs 1 crore to Rs 1.5 crore as of April 1, 2019. This Composition Scheme is available to taxpayers having a yearly revenue of less than Rs 1.0 crore.

This maximum is Rs 75 lakh for the North-Eastern states and Himachal Pradesh.

This plan exempts small taxpayers from the time-consuming GST requirements. GST might be paid at a predetermined rate of turnover under this approach.

According to the CGST (Amendment) Act of 2018, which went into effect on February 1st, 2019, a dealer under this plan can offer services up to 10% of yearly revenue, or Rs.5 lakhs, whichever is greater.

A cumulative turnover of different enterprises registered under the same PAN number is taken into account under this program. This change in the exemption limit is extremely advantageous to small enterprises.

3.E-commerce Operators are Given a Specific Treatment

Providing products through the e-commerce industry was not defined before the GST regime. Its VAT laws were changeable. Consider the following example:

Online retailers (such as Flipkart and Amazon) shipping to Uttar Pradesh were required to make a VAT declaration and provide the delivery truck's registration number. If the documentation were not supplied, tax authorities might occasionally take the items.

Again, states such as Kerala, Rajasthan, and West Bengal considered these e-commerce businesses as facilitators or intermediaries and did not need them to register for VAT.

GST has eliminated all of these disparities in treatment and perplexing compliance requirements.

For the first time, GST has explicitly sketched out the laws relevant to the e-commerce industry, and because they are applicable throughout India, there should be no complications with the inter-state movement of products.

4.Logistics Efficiency Has Been Improved

Previously, India's logistics business had to maintain many warehouses across states to dodge the present CST and state entrance tariffs on inter-state travel.

These warehouses were compelled to operate at less than full capacity, resulting in higher operational expenses.

However, under GST, these limitations on interstate movement of commodities have been reduced.

As a result of GST, warehouse operators and e-commerce aggregators have expressed interest in locating their warehouses in key areas such as Nagpur (India's zero-mile city), rather than every other city on their delivery route.

Reducing needless logistical expenditures is already enhancing revenues for enterprises involved in the delivery of products.

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5.GST Governs the Unorganized Sector

During the pre-GST period, several industries in India, such as construction and textile, were primarily unregulated and disorganized.

However, under GST, there are facilities for online compliance and payment, as well as for claiming input credit only after the supplier has received the amount. These sectors now face responsibility and regulation because of this.

Let us now look at the GST drawbacks. Please keep in mind that for a business to function properly, these drawbacks must be addressed.

6.Simple and Straightforward Online Method

The whole GST procedure (from registration to submitting returns) is completed online and is quite straightforward. This has benefited start-ups since they no longer must go from pillar to post to obtain various registrations such as VAT, excise, and service tax.

7.Compliance Rates Have Dropped

With GST, the number of distinct compliances has decreased. Previously, VAT, Excise, and Service Tax each had their filing and compliance schedules.

Depending on the nature of the holding, they were either monthly or quarterly. GST, on the other hand, necessitates the submission of a single return.

There are around 11 filings, four of which are fundamental returns that all taxable individuals must submit.

8.Assisting Government Revenue in Finding Buoyancy

GST is expected to boost government revenue by broadening the tax base and improving taxpayer compliance. T

The change is also expected to boost the country's rating in the 'Ease of Doing Business Index.' Furthermore, it is projected that it will increase GDP by 1.5 - 2 percent.

GST Benefits to Common Man: In Brief

• Many items and/or services are either tax-free or taxed at a rate of 5% or less.
• The impoverished will be compensated.
• Small traders will be able to compete on a fair playing field.
• With fewer exemptions, the tax system has been simplified.
• Products and services will be free to migrate around the country.
• Consumers will gain from more competition among manufacturers and enterprises.
• Movie ticket costs, two-wheelers, televisions, stoves, washing machines, SUVs and luxury automobiles, two-wheelers, and other items will be reduced.

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FAQs

Is it necessary for a nation liquor seller to switch from VAT to GST because alcohol is exempt from GST law?

No registration is necessary if the individual is involved in a 100 percent supply of items that are not subject to GST.

What are the major benefits of GST?

Advantages of GST:

• GST eliminates the cascading effect of tax.
• Higher threshold for registration.
• Composition scheme for small businesses.
• Simple and easy online procedure.

How does GST benefit the government?

GST is expected to boost government revenue by broadening the tax base and improving taxpayer compliance. The change is also expected to boost the country's rating in the 'Ease of Doing Business Index.'

Furthermore, it is projected that it will increase GDP by 1.5 - 2 percent.

How can I claim GST credits?

Credit can only be obtained if the following requirements are met:

• You have a tax invoice or debit note issued by a registered supplier.
• You have received the goods or services, or both, and you have filed the GST return.
• The tax levied on such delivery has been paid in full by the provider.

Summing Up

It is never simple to make a change. The administration is attempting to ease the transition to GST. The implementation of GST has resulted in a transparent and corruption-free system in the country.

The advantages are numerous and not just beneficial to businesses but also to consumers.

It is critical to learn from global countries that introduced GST before us and overcome the teething problems to reap the benefits of a unified tax system and simple input credits.

If this article made you see the better of GST, do share it with your colleagues. Let us know if we've missed anything in the comments area below.