HOW DOES GST AFFECT YOUR BUSINESS
What is GST?
- GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at an all India level. Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase.
- The system allows the set-off of GST paid on the purchase of goods and services against the GST which is payable on the supply of goods or services.
Why is GST so important?
- GST is anticipated to be a major reform in stimulating growth in the economy. GST will not only make the tax system simpler, but will also help in increased compliance and boost tax collections.
What is the current status of the GST Bill?
- The Government intends to introduce GST across India from April 1, 2016
- A Constitutional Amendment Bill for Goods & Services Tax (GST) has been introduced in Lok Sabha.
- The Bill needs to be approved by a two-third majority of the house. After this, it needs to be endorsed by at least half of the State Assemblies (15). After this the Centre will introduce separate legislation for GST. The States too will be required to bring in legislations
What taxes will be eliminated as a result of GST? Will this be an extra tax?
- To begin with, the GST is a value added tax to be levied on both goods and services (except for a list of exempted goods and services), at both the centre and state level.
- There will be a Central GST, which will eliminate Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (commonly known as Countervailing Duty or CVD), Special Additional Duty of Customs (SAD) and Central Surcharges and cesses.
- In addition there will be State GST. This will eliminate State VAT/Sales Tax, Entertainment tax (unless it is levied by the local bodies), Luxury Tax, State Cesses and Surcharges.
- The third one will be Integrated GST (IGST) on inter-State transactions of goods and services. There is an agreement on eliminating entry tax in GST. At the same time, petroleum products will be part of GST with ‘nil’ rate
How will this impact the revenue of the individual states
- The Finance Minister has assured that no state will lose revenue and it will be a win-win situation for all. In addition the states will also receive compensation in the form of CST. The government will also give constitutional assurance to compensate any possible losses incurred by the states.
- GST reform is also expected to promote cooperation as the center and state will work together to take decisions. These decisions would need 75% majority approval.
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 may benefit individuals as prices are likely to come down. Lower prices will lead to higher consumption, thereby helping companies
- As multiple taxes on a product or service are eliminated and a single tax comes into place, the tax structure is expected to be much simpler and easier to understand. Paperwork will become simpler and there will be a reduction in accounting complexities for businesses.
- A simple taxation regime will make the manufacturing sector more competitive and save both money and time
This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute assurance, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein.
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