The only value added tax levy on manufacture, sale and consumption of goods or services in India will be GST. It is introduced to replace several indirect taxes counted over goods and services by national as well as state governments. GST is a mile stone when we consider to reform tax system in our nation. Way ahead GST is implemented in India and public of country have several opinions on this unified Tax system.
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We are looking over some merits and demerits of GST that will directly affect the business scenario in upcoming time.
Let us start with benefits of this Bill introduced as hope for much better tax culture.
Some positive outcomes will be as below of GST implementation-
1. Removes multiple taxation -
As we know that government succeeded to pass the bill in rajya sabha and lok sabha and grant an approval by President, All set to come up with a single Tax plan which will be more easier and acceptable. GST will replace 17 indirect tax levies and compliance costs will fall.
2. Less Tax disputes-
We will have significant reduction in tax disputes related to the definition of goods and services as GST is uniform tax on both goods and services.
3. Reduces Tax on manufactures
There will be a significant reduction of tax on manufacturers as this GST is a consumption side tax which helps manufacturers be more competitive in international and national markets.
4 Boost GDP by 0.9-1.5%
By few estimates once GST gets completely implemented India will get a boost of almost 9 to 1.5 percent on its GDP.
5. Prevent Tax Leakage
With uniform tax structure of a product across all the states it will help in preventing tax leakage and increase the revenue of government.
6. Seamless interstate flow of goods - Lower transit time and high truck utilization
It will also help in seamless interstate flow of goods which will significantly lower transit time and improve the truck utilization.
7. Greater cost competitiveness
It will also help in greater cost competitiveness as your competitor now will not get extra tax benefits because of its location or his product.
8. Positive impact on sectors - a) Cement, b) Automobiles c) consumer durables, d) Logistics e) Entertainment f) Metal g) Building Material
They are expected to be productivity gains across all the sectors especially in tax and logistic areas. There are few sectors which will have positive impact due to lower tax rate even though if we consider 10% tax rate which is on higher side cement, automobiles, consumer durables, entertainment, building material and metal all these sectors currently have around 25 to 35% of tax rate which is likely to get reduced once GST.
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Now we will discuss about the negative impact of GST bill.
1. Dual Control on every business
First dual control will be there on every business which is by both state and central like today the retails business only has the state government's intervention but now it will have both central and state intervention.
2. Credit will be available with GST network
All credit will be available on from online connectivity with GSt network only which may impact small businesses negatively as may they may find using system more difficult.
3. State lose autonomy to change tax rate
The state will lose autonomy to change tax rate and it will be done by GST council.
4.Loss to manufacturing states
Manufacturing states will be in loss as 50% of VAT revenue will have to be shared with centre, will lose out on CST revenue accruing currently from interstate sale of goods, IGST (SGST component) revenue will go to consuming state.
5. Petroleum and liquor is still out
Petroleum and liquor is still kept out of GST purview but they form almost 40% if India's total trade, so significant portion of trade is still out of GST purview.
6. Impact on inflation
If the GST rate is kept on higher side it may have negative impact on inflation.
7. Negative impact on sectors: a) Textile, b) Dairy Products, c) Media, d) Pharma, e) It/ITeS f) Telecom
Last is negative impact on sectors which are currently enjoying low excise duty or other tax benefits such as textile, dairy products, media which doesn't have any indirect taxes currently farmer which ejoys lot of tax benefits which are likely to continue for some more time then ITes and Telecom are both service related industry and in all likelihood GST rate be higher than the current service tax rate.
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