What is the difference between the current taxation and the new goods and services tax (GST) in India? What is the impact?

The whole of India was under the GST storm when the Rajya Sabha had passed the GSTBill, 2014.  Industry experts and government officials had thought of the new proposed structure on an amalgamated indirect tax regime to endorse the concept of ‘One Nation, One Tax’.

To unravel the impact of the bill across different industries after it has been changed into law, it is absolutely necessary to find out the differences with the current tax structure according to the structure of the GST and the different ways that the various tax components will operate for the various transactions of goods and services.

Do We Really Need the GST?

 Yes, we do, we will explore the logic and the rationale for the need of the GST. The mid of 1980’s, saw the implementation of various indirect tax reforms, although in a piecemeal manner.

It is undeniable that the reforms have greatly transformed the different taxation system of the nation and have halted the cascading effect of tax-on-tax. However, when it comes to implementation of new taxes the enterprise has been only partly successful.

The introduction of Value-added taxation in the country can be traced back to 2005, and it conveniently replaced sales taxes and it did cover across transactions and the sale of goods up to the point it reached the retail stage. 

The Difference between Indirect Taxes and GST

The implementation of VAT ensured that each and every person in the transaction chain does get a credit of all the taxes levied on the previous purchases. However, this failed to stem let alone stop the cascading effect of taxes.

At the central level, CENVAT or Central value added tax was introduced in which credit of tax is paid on inputs and the capital goods till the manufacturing stage; it does not stretch to the distribution chain.Besides, it is not really feasible to truly implement the VAT since all the goods and services are not taxable at the same rate across the country.But GST is different in this respect as it stops all this discrepancy as it differentiates between goods and services; what it means that with the GST, tax evasion is not possible by selling goods as services and you cannot get the undue benefit out of it.

 Additionally, what GST ensures that all the transactions will be taxable at a uniform rate all across the country. 

The GST will be implemented in the form of dual GST—the Central GST and State GST levied by the Center and the state, respectively.  The (IGST) or the component Integrated GST is taxed by the central government on the various interstate supply of goods and services. 

Also, you will further notice that the new framework will subsume almost all the indirect taxes under the purview of the center and regional states, which thankfully puts a stop to the different taxes on goods and services, propagating the idea of one Nation, one tax. For more details about GST Bill India visit: http://www.vramaratnam.com/

What's the importance of GST bill in India?

GST or Goods and Services Tax (GST) is defined as the tax levied when a consumer makes a purchase. It can be defined as a comprehensive indirect tax and all-in-one tax which amalgamates the manufacture, sale, and consumption of goods taxes along with the services.

It is a simplified version of taxes as GST is set out to replace all indirect taxes which are levied on goods and services by both the Indian Central and State governments. 

This simplification of taxes puts it under a single umbrella to eliminate the impact of taxes on the production and also the distribution of prices of various goods and services. Accounting firms ina Chennai can help you unravel the nitty-gritty of the GST for of tax regulations.

Impact of Taxes

The current complex tax structure involves the taxes to be levied by the State and Union governments separately leading to the increasing and complicated tax structure. The taxes are implemented at various rates and at multiple points which bamboozle most taxpayers and that is why the help of a tax consultant in Chennai or any other place in India can make things easier for you.

As far as the Centre is concerned there are various taxes it levies on the common people like the Income tax, excise duty, service tax, central sales tax and security transaction tax. And at the state level, it includes VAT or sales tax, property tax, state excise, entry tax and agriculture tax. 

It almost acts as a double whammy as it leads to an increased tax burden on the Indian products making the prices and sales of products in the domestic, as well as international markets, shoot up.

So is GST the Savior in Disguise?

The cascading effect of multiple taxes proves to be a burden on the common man and the only solution as of now is the GST. The framework of the proposal of dual GST means that will have a federal structure. 

To explain further the GST will basically be divided into three kinds of taxes that includes Central, State and another one known as the integrated GST that helps handle inter-state transactions. Under the present GST tax reform, different kinds of services are included in sale, transfer, barter, exchange, and rental which will include a CGST and SGST.

 The Importance of GST

 The impact of indirect taxes can be explained in a number of ways, the example which can explain things well is if one person lets call him A sells goods to another person B after levying sales tax and then again when B re-sells those goods to C after levying sales tax on it.

So, when B includes the sales tax paid on the previous purchase it becomes a tax on tax. This is how GST can simplify things and makes things easier to the common consumer.

Is there any Con to the GST Tax?

In India, there are two forms of GST namely the Central GST or CGST and the state GST or SGST. The only obstacle to the implementation of GST can be the coordination amongst the different states. The Centre and States have to agree on one thing that is the uniformity of GST rates, the inter-state transaction of different goods and services, there should be a sea change in the infrastructural standpoint. The transition from the old form of taxes to the new form of taxes that is the GST pattern must be smooth without any loopholes.

The GST being a destination based tax there has to be a clarity as to where the goods are going and for that there needs to be a proper methodology that would ensure proper management in terms of services provided.

A uniformity of GST in all states at the same time and the same rates is the only way that will help improve tax governance.

GST How to Guide

Indirect taxes have constantly evolved in India. Now, that the One Hundred and First Amendment Act of the Constitution of India has been enacted, the citizens of India have been greeted by GST. Not to mention it has created ripples in the financial world.

Which brings us to the fact, what is GST and how it can impact each citizen of the country? If we have to explain things in a simplified way, it is the comprehensive Goods and Services Tax. The imposition of GST in India, that is the Indian system of indirect taxation is said to be a revolutionary step as it has rationalized indirect taxes in India. 

In a nutshell, GST will create a single market as it will replace all indirect taxes in the country.

With the advent of this much-awaited goods and services tax on the 1^st of July, The various departments of the governments are ensuring that the transition of the former tax regime to the present tax regime is smooth. Not without reason, GST has caught the imagination of the teeming millions and said to be one of the biggest financial reforms since the independence.

 

The Effect of GST on the Entire Population

Whether it is good or bad, it is difficult to gauge now but it has impacted just about everyone right from the small shopkeeper to the greatest of a businessman, nobody has been able to avoid the impact. 

 GST converges about 15 different taxes and levies and amalgamated and unified the entire country into one common market which has a single tax structure. This ensures the smooth transferring of goods from one end of the country into another, across different territorial borders without any hurdles. 

The long and short of GST

 The GST Tax is a comprehensive, multi-stage, tax which is destination-based, that will be levied upon on all value additions.

What is multi-stage and how can we explain it? A good or an item follows an entire gamut of steps right from manufacture to the final stage of production. When you buy the raw materials it will be regarded as the first stage. The next stage is all about the production or manufacture. 

Then again there is another stage which involves the warehousing of materials. The next obvious step is selling off the product to the retailer. 

Finally, you have the retailer selling you the product, thus completing the journey and ending up with the consumer.

So let us understand this process with an example, suppose a manufacturer wants to make a shirt. For the same, he has to buy the yarn. Then it gets turned into a shirt after manufacture. 

So, the value of the yarn immediately increases when it is made into a shirt. 

When the manufacturer sells it again to the warehousing agent who labels and attaches price tags to the shirt. So like this value keeps on rising and when the warehouse sells it to the retailer who invests in the marketing and increases the value still further.

GST will be imposed on all these value additions and this helps achieve the final sale to the end customer.

 Goods and Services Tax will also be imposed on all transactions right from the starting process to the end process and that means the whole manufacturing chain.

The chief reason of having one consolidated indirect in place of multiple existing indirect taxes is to help build a strong economy and hopefully, the GST will live up to its ever-increasing hype and hoopla.  There are various accounting firms in the country such as chartered accountantfirms in Chennai which will guide you through the entire process of unraveling GST and make sure you are able to keep yourself financially afloat.