There are 8 main objectives under the updated regime of GST(goods and service tax) such as:
Let’s consider each objective separately.
"One Nation, One Tax" is the primary aim of the GST. Interesting is the fact that GST replaced plenty of indirect taxes under the previous tax regime. The main benefit of one single tax is that each state will have the same rate for a specific product or service. Tax administration is much easier with the Central Government deciding the rates and policies. Common laws can be presented, such as e-way bills for goods transport and e-invoicing for transaction reporting.
In addition, tax compliance is much better, as taxpayers are not broiled with numerous return forms and deadlines. Overall, it's a combined system of indirect tax compliance.
One of the exciting objectives of GST was the subsumption of a majority of the indirect taxes.
India had several former indirect taxes, such as service tax, Value Added Tax (VAT), Central Excise, and so on, which used to be levied at multiple supply chain stages. The states and others controlled some taxes by the Centre. There was no unified and centralized tax on both goods and services.
GST merged all indirect taxes into one. As a result, taxpayers faced fewer compliance obligations, and government tax administration became easier.
Before, because of different indirect tax laws, taxpayers could not set off the tax credits of one tax against the other. For instance, the excise duties paid during manufacture could not be set off against the Value Added Tax (VAT) payable during the sale. This carried out a cascading effect of taxes.
With GST, each stage of the supply chain is taxed only on the net value-added. By removing the cascading effect of taxes, input tax credits were able to flow continuously across both goods and services.
GST laws in India are far more strict than any of the former indirect tax laws. Under GST, taxpayers can only claim an input tax credit on invoices uploaded by their respective suppliers. Thus, the chances of claiming input tax credits on fake invoices are minimal.
E-invoicing has further reinforced this goal. Additionally, GST is a nationwide tax with a centralized surveillance system, so the crackdown on defaulters is much quicker and more organized. In this way, GST significantly reduced tax fraud and tax evasion.
Another important part is that GST helped widen the tax base in India. Formerly, every tax law had a different threshold limit for registration based on turnover. Since GST is a combined tax on goods and services, it increased the number of registered businesses. With input tax credits excluded, the stricter laws helped bring specific unorganized sectors into the tax net - the construction industry, for example.
We should mention that, formerly, taxpayers faced a lot of hardships dealing with different tax authorities under each tax law. Also, while return filing was online, most of the assessment and refund procedures took place offline. Now, we can do all GST procedures almost totally online. The process of registering, filing returns, obtaining refunds, and generating E-way bills can all be completed in a single click. The act contributed to the final simplification of doing business in India and made taxpayer compliance easier to a large extent.
By having a single indirect tax system, there is less documentation required for goods to be supplied. A GST can reduce transportation cycle times, develop supply chains and turnaround times, and consolidate warehouses, among other benefits. The removal of interstate checkpoints thanks to the e-way bill system under GST improves transit and destination efficiency for the sector. In the end, it helps cut down the high logistics and warehousing costs.
GST increased consumption and indirect tax revenues. Because of the cascading effect of taxes under the former taxes, the prices of goods in India were higher than in global markets. Even between states, the lower-Value Added Tax (VAT) rates in certain states led to a disparity in purchases. The uniformity of GST rates has contributed to overall competitive pricing throughout India and worldwide. Ultimately, this has increased consumption and revenue.
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