How GST works and state it's advantages ?
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GST stands for Goods and Services Tax levied by the Government in a move to replace all of the indirect taxes. The main reason behind introducing GST is to improve the economy of the nation and that is why it is beneficial.
Advantages of Goods and Services Tax (GST) :
GST is a single taxation system that will reduce the number of indirect taxes. From now, a single taxation term would cover all of those indirect taxes.The Prices of products and services would reduce , thus this system would prove to be beneficial for the people who are fed up of paying high prices.This would reduce the burden from the state and the central government. With the introduction of GST, all indirect taxes would come under a single roof.GST would not be charged at every point of sale like other indirect taxes so in this way, market would be developed.Corruption-free taxation system. GST would introduce corruption-free taxation system.
Advantages of Goods and Services Tax (GST) :
GST is a single taxation system that will reduce the number of indirect taxes. From now, a single taxation term would cover all of those indirect taxes.The Prices of products and services would reduce , thus this system would prove to be beneficial for the people who are fed up of paying high prices.This would reduce the burden from the state and the central government. With the introduction of GST, all indirect taxes would come under a single roof.GST would not be charged at every point of sale like other indirect taxes so in this way, market would be developed.Corruption-free taxation system. GST would introduce corruption-free taxation system.
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Goods and Services Tax (GST) is an indirect tax which was introduced in India on 1 July 2017 and was applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Act Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. GST replaced a slew of indirect taxes with a unified tax and is therefore set to dramatically reshape the country's 2 trillion dollar economy.
Here are four key ways in which Indian startups will benefit from the new system.
1. Making it easier to do business
GST will bring about a uniformity in process and centralized registration that will make starting a business and expanding in different states much simpler. Since startups lack the resources to hire tax experts or a dedicated team for handling varied forms of tax compliance, GST’s objective is to simplify the tax regime by reducing the multiplicity of taxes. This will not only bring compliance costs down but also make taxation transparent with digital tax processing. The Do It Yourself (DIY) model will enable startup founders to complete taxpayer registration, tax return submission, tax payments, and claim refunds online, thereby saving money for all sorts of enterprises irrespective of sector.
2. Reduction in logistics cost and time taken across states
GST will ensure that interstate movement becomes cheaper and is less time consuming, by eliminating small border taxes and resolving check post issues. This will inevitably reduce the costs associated with upholding high stocks, as there will be a smooth movement of goods. As per a CRISIL analysis, GST can reduce logistics costs of companies producing non-bulk goods (comprising all goods besides the primary bulk commodities transported by railways – coal, iron ore, cement, steel, food grains, fertilizers) by as much as 20%.
3. Higher exemptions to new businesses
GST also introduces an optional scheme called the composition scheme, which empowers small businesses with turnover between $30,000 and $77,000 (Rs 20 and 50 lakhs) to pay lower taxes. This will bring respite from tax burdens to newly established businesses. Earlier, as per the Value Added Tax (VAT) structure, any business with a turnover of more than $7000 (Rs 5 lakh) was to get VAT registration. Under GST this threshold for registration has been increased to $30,000 (Rs 20 lakhs), thus providing respite for founders of many startups and small businesses.
4. Financial Inclusion
In the long run, GST will enable financial inclusion in the economy. With the startup community migrating towards digital book-keeping and optimizing existing processes, they would be better predisposed towards fulfilling the eligibility criteria for credit facilities by banks and investors in India and abroad. Furthermore, FinTech organizations will find have easy access to the young and fast-growing ventures digitally, and extend them the line of credit needed to establish and grow their businesses.
Here are four key ways in which Indian startups will benefit from the new system.
1. Making it easier to do business
GST will bring about a uniformity in process and centralized registration that will make starting a business and expanding in different states much simpler. Since startups lack the resources to hire tax experts or a dedicated team for handling varied forms of tax compliance, GST’s objective is to simplify the tax regime by reducing the multiplicity of taxes. This will not only bring compliance costs down but also make taxation transparent with digital tax processing. The Do It Yourself (DIY) model will enable startup founders to complete taxpayer registration, tax return submission, tax payments, and claim refunds online, thereby saving money for all sorts of enterprises irrespective of sector.
2. Reduction in logistics cost and time taken across states
GST will ensure that interstate movement becomes cheaper and is less time consuming, by eliminating small border taxes and resolving check post issues. This will inevitably reduce the costs associated with upholding high stocks, as there will be a smooth movement of goods. As per a CRISIL analysis, GST can reduce logistics costs of companies producing non-bulk goods (comprising all goods besides the primary bulk commodities transported by railways – coal, iron ore, cement, steel, food grains, fertilizers) by as much as 20%.
3. Higher exemptions to new businesses
GST also introduces an optional scheme called the composition scheme, which empowers small businesses with turnover between $30,000 and $77,000 (Rs 20 and 50 lakhs) to pay lower taxes. This will bring respite from tax burdens to newly established businesses. Earlier, as per the Value Added Tax (VAT) structure, any business with a turnover of more than $7000 (Rs 5 lakh) was to get VAT registration. Under GST this threshold for registration has been increased to $30,000 (Rs 20 lakhs), thus providing respite for founders of many startups and small businesses.
4. Financial Inclusion
In the long run, GST will enable financial inclusion in the economy. With the startup community migrating towards digital book-keeping and optimizing existing processes, they would be better predisposed towards fulfilling the eligibility criteria for credit facilities by banks and investors in India and abroad. Furthermore, FinTech organizations will find have easy access to the young and fast-growing ventures digitally, and extend them the line of credit needed to establish and grow their businesses.
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