Goods and Services Tax (GST) is a comprehensive tax system that has revolutionized the Indian tax system since its implementation in July 2017. The GST replaced the earlier system of multiple indirect taxes like excise duty, service tax, VAT, etc., and aimed to create a uniform tax system across the country. The GST is a value-added tax that is levied on the supply of goods and services, making it a multi-stage and destination-based tax.
It is a dual system where both the central and state governments levy the tax simultaneously. There are four types of GST, i.e., CGST (Central GST), SGST (State GST), IGST (Integrated GST), and UTGST (Union Territory GST). CGST and SGST are levied by the central and state governments, respectively, on intra-state supplies, while IGST is levied on inter-state supplies.
The implementation of GST has made a significant impact on the Indian economy, making it easier to do business and reducing the tax burden on the end consumer. Let us look at some of the advantages of the GST system.
Simplification of the Tax System:
It has simplified the tax system in India by eliminating the multiple layers of taxation. Earlier, the tax system was complex, with various taxes levied by the central and state governments, making it difficult for businesses to comply with the tax laws. The GST system has streamlined the tax system by creating a single tax system that has made it easier for businesses to comply with tax laws and reduce the compliance costs.
Reduction in the Tax Burden:
It has reduced the overall tax burden on businesses and the end consumer. Earlier, businesses had to pay multiple taxes, such as excise duty, service tax, VAT, etc., making it difficult for them to survive in the competitive market. The GST system has reduced the tax burden on businesses by eliminating the cascading effect of taxes. It has also reduced the tax burden on the end consumer by making the tax system more transparent.
Ease of Doing Business:
It has made it easier to do business in India. Earlier, businesses had to comply with various tax laws, which were complex and time-consuming. The GST system has reduced the compliance costs and made it easier for businesses to comply with tax laws. The GST system has also reduced the time taken to complete the tax-related formalities, making it easier for businesses to focus on their core operations.
Boost to Economic Growth:
The implementation of the GST system has given a boost to economic growth in India. The GST system has created a uniform tax system, making it easier for businesses to operate across the country. It has also increased the tax base, resulting in higher tax revenue for the government. The increased tax revenue has helped the government to invest in infrastructure and other development activities, creating more job opportunities.
However, like any other tax system, the GST system has its challenges. Let us look at some of the challenges faced by the GST system.
Technology Infrastructure:
The GST system requires a robust technology infrastructure to function effectively. The GST system is dependent on technology for compliance, invoicing, and tax returns. The lack of a robust technology infrastructure has resulted in glitches in the system, leading to delays in tax refunds and increased compliance costs.
Compliance:
It has made compliance easier for businesses, but it still requires businesses to comply with various tax laws. The compliance requirements are still complex, and many small businesses find it difficult to comply with the tax laws.
Tax Rate Rationalization:
It has multiple tax rates, making it difficult for businesses to calculate their tax liability. The multiple tax rates have also led to confusion among consumers, resulting in a decrease in demand for some products and services.
Conclusion:
It has revolutionized the Indian tax system and has created a uniform tax system, making it easier for businesses to operate across the country. The system has simplified the tax system, reduced the tax burden, and increased the tax base, resulting in higher tax revenue for the government. However, the system still faces challenges such as technology infrastructure, compliance, and tax rate rationalization.
Overall, the GST system has made a significant impact on the Indian economy, and the benefits of the system outweigh its challenges. The GST system has simplified the tax system, reduced the tax burden, and made it easier to do business in India. The system has also increased the tax revenue, creating more opportunities for the government to invest in infrastructure and other development activities. The GST system is a step towards creating a better and more efficient tax system in India.