A couple of days since the Indian Government took the bold step and implemented GST or Goods and Services Tax, the state of commerce across the country is in confusion. Without any training or exposure to the ground rules and clauses of GST, the people became subject to the tax reform. Now, the response of most businesspersons and traders in the country is positive to the anticipated change that GST is going to bring about but not sure how!
After the big jolt of demonetization on November 8, 2016, the Modi Government has set forth GST that became applicable from July 1, 2017, onwards. The general response of Indian citizens is hopeful and positive that in about a few months, things will get straightened out. Some states handed out booklets on GST to all shopkeepers and business owners. Nevertheless, a lot of misunderstanding still prevails on the present stock taxes and upgrade billing systems, as of now.
What is GST? – A quick recap
GST is a single taxation system where tax is levied on the supply of good and services from the manufacturer to the consumer. It is a form of seamless tax for the whole nation and it will make India a unified marketplace in the end. The system has a strong technological backbone and is totally computerized, reducing the scope of human errors and tax collection costs.
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GST Slabs and Prices:
While Goods and Services Tax aims to replace the cascading tax system in India and make one uniform taxation method, that is both, simple and computerized to entice maximum ease of use, free of error, all pricing is undergoing changes. There are four slabs after the final GST rates are out—at 5 percent, 12 percent, 18 percent and 28 percent. This tax system is also going to increase GDP by 2 percent. The lowest rate of GST is 5 percent, applicable on common use items. 12 percent and 18 percent standard rates are applicable to all Goods and Services Tax regime. On the other hand, taxes on goods and services now above 28 percent are definitely going to come down and the maximum applicable tax will be limited to 28 percent.
How is GST a step ahead to the future?
The Goods and Services Tax is applicable on the ‘value addition’ in the supply chain for goods and services. Therefore, GST will actually aid in raising India’s medium-term growth to more than 8 percent. GST will be the key to fostering productivity by encouraging ease of business (for example, the stress-free movement of goods and services across the Indian states) and transforming India into an attractive, unified marketplace for foreign investments in the economy.
The one fact that will force all Indian states to perform better, compete with employment creation and enhancing their own territorial economies is that SGST will be collected by the State in which the supply (which can be from any State) meets its demand. In other words, the State that creates demands which translate into having residents with high buying power, which means people with a good source of income, will earn more. This is a healthy competition between the States since each will now look forward to creating wealth by enhancing the income source for its people. In other words, States will look forward to increasing industries and in creating bonafide employment solutions.
This transparent tax system (GST) will positively influence Government revenues as well while at the same time, it will reduce the overall costs of most goods and services in the market, across India. While some prices will increase by the margins, most will decrease, making basic needs more affordable to the common people.
Overall, GST is an excellent step ahead into the future where prospects look good—India’s growth rate for the financial year 2016-2017 is estimated to be 6.8 percent and 2017-18 will see 7.2 percent according to International Monetary Fund, Washington. India is a fast-paced emerging economy and the future is changing for the better.
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