In simple terms, GST will be a single tax on supply of goods & services right from manufacturer or producers to the customers. The Goods and Services Tax Bill or GST Bill, officially known as The Constitution (122nd Amendment) Bill, 2014, is a comprehensive indirect tax levy on the manufacture, sale and consumption of goods and services throughout India. It was proposed & passed keeping only one thing in mind for citizens “One Country, One Tax, One Market“.
The GST Bill introduced in the Lok Sabha in December 2014. A huge change like GST requires a constitutional amendment, which requires a bill to pass in both houses of Parliament; Lok Sabha and Rajya Sabha. The GST will ensure the process of indirect Taxation and makes it easier and more effective. This tax will be levied on the manufacture, sale, and consumption of goods as well as services at the Central and State Government levels.
Currently, the total tax collection in India (Direct and Indirect Taxes) is 14.6 lakhs crore, of which around 34% comprises indirect taxes with INR 2.8 lakh crore coming from excise and 2.1 lakh crore from service tax. Once GST comes into effect, the percentage of indirect tax is supposed to increase in the country.
The combined GST rate (Central GST and State GST) is expected around 14%-16% that is being discussed by the government.
Currently, services tax is 10% and the combined charge indirect taxes on most goods is around 20%.
How individuals and companies will be benefited by GST?
After GST, both the central and state taxes will be collected at the point of sale. Both the components (the central and state taxes) will be charged on the manufacturing cost. It will benefit individuals as well as the companies as prices are likely to come down that will lead to more consumption and more sale of the commodity.
GST! How is it important for your Start-Ups?
Implementation of GST will benefit all over the country but growing start-ups have a lot of reasons to rejoice:
- GST Bill would bring clarity in the online business space. E-Commerce companies are paying more than one tax applicable on any given transaction such as VAT, CST, Excise, Service Tax, and TDS. Involvement of several different processes makes it very complex to differentiate goods and services component of each transaction. GST will bring uniformity across the country and reduce compliance costs.
- This GST Bill will bring about uniformity in a process and centralized registration, making easy for new start-ups and expanding in different states. A VAT registration from sale tax department is required for any new business. A business that is operational in different states has to face a lot of different issues regarding procedure and fees in each state.
- GST will respite from tax burdens to newly established business. Any business with a turnover of over INR 5 lakhs has to pay VAT now. GST will make this limit higher, to up to INR 10 lakhs. Businesses with revenues between INR 10 lakhs and INR 50 lakhs will have lower tax rate slabs.
- The GST Bill will bring respite for businesses in both sales and services. The tax calculation will get easier and will be done in total; however, it will not distinguish between sales and service.
- It is very difficult to spend too much time and energy to manage various taxes at various points. Different regulations at different states make the process very complex. GST will help for making the process simpler by integrating all taxes.
- GST will save the logistics costs of companies and time across the states. Interstate commercial transport will get cheaper by up to 20%.
- GST will reduce the cost of doing business and increase profitability. Proposed GST Bill will attract more investment that will boost the India’s GDP growth and push the tax revenue of the Government.
What’s out of the GST regime?
Items on which GST would not apply; Alcoholic liquor, petroleum crude, high-speed diesel, and motor spirit (petrol), natural gas and aviation turbine fuel.
Proposed GST Bill would be a win-win situation both for the government and the taxpayers.