A speech of 5 minutes on impact of GST in India
Answers
Here's Himanshu,
GST-Goods & Service Tax
India just witnessed one of the biggest tax reforms — GST on the 1st of July. After the using demonetisation as a game changer, the government is on a roll out to create a revolution through indirect taxes. After 16 long years of debating the country has finally adopted a unified approach of national sales tax eliminating individual taxes at the state and central level.
The levy of GST marks the economic integration in India.
What is GST?
GST is a single tax system on goods and services. In the previous tax system, tax is levied at every stage of manufacturing, wholesaling and retailing by the respective states and unions. However, the GST system is going to be applicable only on the ‘value added’ at each stage.
Goods & Services Tax is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.
Multi-stage
It is the various steps involved from manufacturing to the final stage. This ideally includes factors like purchase of raw materials, production/manufacturing, wholesaling, retailing and finally selling it to the end user.
Destination based
Taxes will be levied depending on the place of where these stages are implemented. Basically, at every point of sale.
Value Addition
This is the most impactful aspect of GST. Tax would be levied on value additions at each level- the monetary worth added to achieve the final sale to the end customer. Eg. If a manufacturer wants to make a dress- he would first purchase yarn and then convert it into a dress. So the value of the yarn is increased when the yarn becomes a dress.
This is going to reduce the costing drastically making certain goods and services more affordable to the end users. The supply chain will also benefit set-offs for the taxes paid earlier.
What is state GST and central GST
Within the state transactions- Here there will be a revenue collected by the Central (CGST) + State (SGST) governments
Outside the state transactions- Here the revenue will be collected only by the central governments.
Previously, each state had their own taxation systems like VAT, Excise, central sales tax, etc. This was all be replaced by a single tax- GST.
Overall impact of GST
In India, a majority of the tax revenue collected is indirect though it is getting better over time. GST is what India needed for unifying its indirect tax system. This not only benefits the government but also encourages businesses to participate actively
Almost all countries use the GST taxation system. This will help the country be at par with the tax systems used by foreign countries
GST is aimed at smoothing the process of tax collection as well as improving the Indian economy by removing the discrepancies between the states and creating an integrated system for indirect taxes.
Whether GST is going to be viable or not only time can tell.