What is GST? And what are the advantages and disadvantages of GST?
2 Replies
(Guest)
GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017
Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based taxthat is levied on every value addition.
In simple words, Goods and Service Tax is an indirect tax levied on the supply of goods and services. GST Law has replaced many indirect tax laws that previously existed in India.
GST is one indirect tax for the entire country.
The manufacturer who makes biscuits buys flour, sugar and other material. The value of the inputs increases when the sugar and flour are mixed and baked into biscuits.
The manufacturer then sells the biscuits to the warehousing agent who packs large quantities of biscuits and labels it. That is another addition of value after which the warehouse sells it to the retailer.
The retailer packages the biscuits in smaller quantities and invests in the marketing of the biscuits thus increasing its value.
GST will be levied on these value additions i.e. the monetary worth added at each stage to achieve the final sale to the end customer.
Consider goods manufactured in Maharashtra and are sold to the final consumer in Karnataka. Since Goods & Service Tax (GST) is levied at the point of consumption, in this case, Karnataka, the entire tax revenue will go to Karnataka and not Maharashtra.
The GST journey began in the year 2000 when a committee was set up to draft GST Law. It took 17 years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017 the GST Law came into force.
Advantages Of GST
GST will mainly remove the Cascading effect on the sale of goods and services. Removal of cascading effect will directly impact the cost of goods. The cost of goods should decrease since tax on tax is eliminated in the GST regime.
GST is also mainly technologically driven. All activities like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal. This will speed up the processes.
Ankit Shrivastava
(Financial Adviser)
(8 Points)
Replied 23 January 2018
Like with every other tax, the GST (Good and Sales Tax) comes with its own set of advantages and disadvantages. Here are two each of the major ones:
ADVANTAGES:
One Tax for All Goods
Consumers no longer have to fret on the taxes and charged added to their bills as they now have a clear cut picture. For example, buying an amusement park ticket will come with a 28% GST while a non-branded wheat flour will have no GST charged.
Boosts Revenue
Since GST will record every part of a product manufactured, it will ensure taxes are paid and boost the revenue for the government. But, the lower GST charges on essentials also ensures that traders and sellers earn more since consumers are willing to spend more.
DISADVANTAGES:
Increased Paperwork
Though all bills are to be raised online, there has been an increase in the paperwork to be submitted, as some sellers are required to file the return multiple times in a month.
Consumers Shy Away from Luxury Goods
Since a 28% tax is levied on luxury goods and services, it has led to a loss in revenue for related businesses.
For more information, read the impact of GST on services.
Recent Topics
- ITC on Car loan processing charges
- Documentation to Substantiate Foreign Travel as Bu
- Deficiency Letter
- DRC 01 along with SCN not received
- GSTR 7 amendment
- Change Reason For Challan in already paid chalan
- 🤖 The Future of Tax Filing: How Automation
- Andromeda Aagents income
- GST RFD 01
- Monthly Pension from EPFO exempt or taxable?
Related Threads
CAclubindia
