The Constitution (One hundred and first Amendment) Act, 2016 introduced a national GOODS AND SERVICE TAX in India, which is to be implemented from 1st April 2017. GST is one of the most significant financial and tax reforms since Independence. It is a single indirect tax that combines several indirect taxes. The Parliament passed the GST bill on August, 2016 with an objective to create a uniform tax system by replacing various indirect taxes levied on goods and services by central and state governments like Central Exercise, Service Tax, Customer tax, Central Surcharges, Central and State Cess, VAT/Sales Tax, Entertainment Tax, Luxury Tax etc.
GST will create a far-reaching impact on almost all the aspects of the business operations in the country. It will create implications for various sectors in various ways.
Many companies in India will be benefited in several ways under the new taxation system of GST.
Currently, companies pay many indirect taxes in different states at different rates. GST will combine all these indirect taxes in the form of a single tax. Indirect tax has a significant impact on the business as these taxes comprise a higher share of total tax in developing countries like India. GST is a massive boon for India, considering that the tax burden and government interference in the taxation procedure is very high and time-consuming. This complex taxation system slows down the work process of the companies. Moreover, there is no self-assessment procedure in the current VAT system, and it is a very hectic work for the companies.
In the new era of GST, companies in India will be benefited by GST registration for many reasons. These are:
- SIMPLIFY THE SYSTEM OF TAXATION:
Currently, companies spend a lot of time, resources and energy to manage many different kinds of taxes at the same time. Various procedures, regulations and filing charges in different States make the taxation process a very complex hardship. GST aims at simplifying the process by amalgamating 17 different indirect taxes levied by the central and state governments under a single umbrella.
It will be beneficial for startups, as well. It is mandatory for them to have a VAT registration from the department of sales tax. A startup operating a business in different States at the same time has to face a lot of issues concerning the various procedures, regulations and fees in each of those states. GST aims to bring uniformity in the process of taxation and a centralised online registration system which will make starting a business and expanding across the nation very simple and hassle-free.
- DECREASE IN COST OF PRODUCTION:
Companies will get a reduced tax burden after their GST registration in various sectors. As a result, the cost of production will decrease, which leads to an increase in demand and consumption of goods by consumers and so that will increase the profit margin of the companies.
- ONE COUNTRY ONE MARKET:
After the implementation of GST, the whole country will follow the same tax procedure. The companies will be able to sell their goods and services without any territorial limits and India will become a stock market.
- REMOVE CASCADING EFFECT:
An amalgamation of all central and state taxes will mitigate the cascading effect of the current tax structure or double taxation. It will nullify the scopes of double taxation which arise in specific sectors due to different kinds of taxes on a single good or service such as licensing of intellectual properties like patents and copyrights, software, e-commerce and leasing.
- BUSINESSES IN BOTH SALES AND SERVICES:
There are individual business ventures like that of restaurants, sales and service centres of various products like electronic goods, cars, etc. which fall under both categories of sales and service tax. They have to calculate these two taxes separately on the same sale and service to one customer as their sale and service often go hand in hand. GST will not distinguish between sales and services, thus, the tax can be paid on the total at once. GST will, therefore, prove to be very easy to compute.
- HIGHER EXEMPTION:
In the current indirect tax structure, any business which has a turnover of more than Rs five lakhs has to get VAT registration mandatorily and pay VAT to government. GST makes this limit higher, up to Rs 10 lakhs and, on top of it, businesses with turnover between Rs 10 and 50 lakhs will be taxed at lower rates. This will bring rejoice to the entrepreneurs, especially to those of the newly established startups and small businesses.
- ONLINE FACILITY
The online facility of tax returns, refunds and tax payments through GST net will save time and cost of the companies.
- EASY EXPORT
GST is going to make the export procedure easier by providing many tax benefits and making the refund process more manageable.
- INTERSTATE TRANSPORT:
Today’s high competition in the E-Commerce industry force the industries to deliver for e-commerce sectors within the same day. After the GST implementation, Interstate transport would be cheaper.
Not only that, in interstate transportation the trucks need to stop at check posts and toll plazas for weeks to get the clearance to enter the state. With the implementation of the GST, the trucks need not stop at check posts. This will reduce the buffer stock and will thus increase the operating efficiency of the companies.
- WIDER AREA OF GST
The area becomes wider in GST, which helps each assessee in the supply chain to become part of GST. So the loopholes of tax minimise, and all the assesses can take benefit from each other.
GST will change the way business is managed in India. It will help boost employment opportunities and new job openings, facilitate the ‘Make in India’ campaign, increase GDP, tax-GDP ratio, revenue surplus and will make a Uniform and Stable Tax Regime by implementing – One-Country-One-Tax. So, in the end, we can say that GST will be very helpful and beneficial for the companies in India. The dream of a transparent, corruption-free taxation system throughout the country is going to be right for the companies very soon.
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