First of all, we need to know about what is GST (Goods And Services Tax ) and then we will discuss the advantages of GST.
Goods and Service Tax(GST)
GST is a “value-added tax” levied on services( like internet, entertainment, electricity, transportation, etc) and goods (like electronics products, cars, furniture, clothes, etc) sold for domestic consumption.
All this value-added tax or we can say that GST on every good and service is collected from the consumer by the seller. Then GST is remitted to the government of the Nation by the seller of goods and services. The term “Value added tax” or VAT can be explained as a consumption tax on a product while it is in its making process from raw material to the final product. In every single stage, the value of VAT is imposed on the goods and services in the supply chain where value is added to the product. It can be explained with the help of an example of a mobile phone.
First of all, when a company manufactured a product let’s assume a mobile phone they have to collect all the electronic parts of the mobile. They collect the parts from different suppliers according to the design and here tax is imposed on the parts let’s assume this first stage where tax is imposed on the product. Then the company assembles the parts and makes the mobile phone and sells it to the wholesaler and in this second stage tax is imposed. Then wholesaler sells the product to the retailers and in this third stage tax is imposed.
The retailer sells the product to the consumers and in this stage also tax is imposed. But before GST in every stage, the same amount of tax is imposed by the seller. This can be illustrated with the help of a table given below
Slabs in GST
There are mainly four slabs of GST
- 12% and 18%
In the first slab, the essential items related to export and survival are covered like milk, fruits, vegetables, etc. In the second slab necessities like clothes, food from restaurants, shoes, etc. In the second slab items related to extensive use like mobile, services, etc. In the fourth slab luxury goods are covered like branded clothing, cement, cars, etc.
Types of GST
The abbreviation of IGST is Integrated Goods and Services tax. It is imposed on the goods and services when a transaction happens between two states. For example, Sugar is manufactured in Punjab and it is sold in Goa so in this case IGST is levied on the goods.
The State Goods and Services Tax (SGST) is a tax imposed by the state on goods and services. It supplanted all prior taxes levied by the federal government. Central surcharges and cess, as well as central excise duty, are examples of such taxes.
The State Goods and Services Tax (SGST) is a tax imposed by the state on goods and services. It is collected by the state government. Because each state government has its act, the SGST features may vary. Specific characteristics such as taxable events, value, classification of products and services, and measures, on the other hand, are consistent across the country.
The Union Territory Goods and Services Tax (UTGST) is a tax that applies to goods and services transactions in the Union Territories. In the Andaman and Nicobar Islands, Lakshadweep, Daman Diu, Chandigarh, and Dadra and Nagar Haveli, it is imposed on the supply of goods. It’s worth noting that the UTGST only applies to Union Territories without a legislature. As a result, Delhi, Puducherry, and even the newly constituted UTs of Jammu and Kashmir are subject to GST rather than UTGST. Understanding the definition of UTGST is insufficient. You should also be aware of the appropriate tariffs. The Central Government collects this tax, which in UTs replaces the State Goods and Services Tax.
Advantages of GST in India
There are numerous benefits of GST which are helpful for the growth of the economy of a nation.
1. Eliminating Tax on Tax Effect
After introducing GST in the nation tax on tax effect is eliminated, and every consumer has to pay only one tax on the goods and services which is equivalent to the value addition in that stage. Before GST every buyer(retailer, wholesaler, consumer) has to pay tax at every stage of the product while it is in the supply chain. Which mainly affects the final cost of the product. This is a benefit of GST because it helps to reduce the final price of a product or service.
2. Product Identification
In GST goods and services are provided by 8 digits specific codes that are the HSN (Harmonized System of Nomenclature) code for goods and the SAC ( Service Accounting Codes) code for services. Which helps to identify the category of the product. Because in the previous tax system goods and services are classified into various categories and taxpayers select those categories for their product which has a low tax rate. This is eliminated by GST by its product identification codes. This is a benefit of GST because it helps in the identification of products and services.
3. One Tax that is GST
This shows the major benefits of GST Because In GST there is only one tax for the product while it is in the manufacturing process or the consuming stage. There will be only one amount collected from the buyer in the form of tax. This is equivalent to the value-added to the product. Due to this tax procedure, it became simple and easy for the people of the nation. Also, administration processes are decreased due to one tax on the product.
4. Decrease in Price of the product
As we all know that in GST there is only one tax is introduced on the product. This tax is only collected on the value added to the product not on its price while we purchasing it. This can be easily explained with the help of an example, A retailer purchases a water bottle from the wholesaler at $10 and add $5 of its profit to it, and sells the water bottle at $15.5 to the consumer. He will only pay tax on the value-added amount which is $5 and the value of tax will be $0.5.
While in the previous tax system the tax amount will be $1.5 and the final product price is $16.5. So due to GST product prices are decreased and also the amount of tax on the product is decreased. This is
5. Easy Compliance
This shows the major benefits of GST Because, GST all procedures are online and due to this registration process for becoming a taxpayer, it became easy for the people. Also, filing tax returns became easy and every taxpayer’s time is saved because it is online and easily paid in the form of returns to the government of the nation.
In the previous tax system, the central government and every state imposed different taxes on the same product. This is also included in the benefits of GST, in every state, the tax amount is different for the same product. When GST is introduced only one tax is levied on the product and it is in the form of GST and further divided into CGST and SGST which are divided by the state government and central government in the half proportion. For example when we purchase a mobile phone for $1100 and 10% GST is introduced on it which will be $110 then $55 in the form of CGST is collected by the central government and $55 in the form of SGST will be collected by the state government.
Common-Man,s Advantages from GST
- Many goods and services are either tax-free or have a tax rate of 5% or less.
- Poor people will be compensated.
- The playing field will be leveled for small traders.
- Fewer exemptions and a simpler tax system.
- Products and services will be able to freely travel across the country.
- Consumers will gain from greater competition among manufacturers and enterprises.
- Movie tickets, two-wheelers, televisions, stoves, washing machines, SUVs, luxury automobiles, and two-wheelers, among other things, will be less expensive.
Advantages for the Economy with GST
- The establishment of a single common market.
- Manufacturing processes are becoming more complex.
- Improving exports and investments.
- Increased economic activity leads to the creation of additional employment.
Industry and Trade Benefits From GST
- Registration, return filing, tax payment, and refund procedures are all uniform.
- The smooth movement of tax credits from the supplier or manufacturer to the merchant or consumer eliminates tax cascading.
- Small-scale suppliers can make use of the composition plan to reduce the cost of their items.
- Increased efficiency in tax neutralization, allowing exports to compete on a worldwide scale.
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