Analysing The Significance Of GST In The Current Economic Scenario

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The goods and services tax (GST) is an indirect tax on the supply of goods and services for domestic consumption. The GST Act came into effect on 1st July 2017 and has since caused a sea change in the Indian taxation system. This article gives a brief overview of the significance and implications of the GST Act in today’s scenario.

Proposed Benefits 

You should first know about the benefits that the GST Act aimed to bring, most of which reflect in today’s economy as well.

  1. Reduce the cascading effect of taxes
  2. Lower the burden of taxes on the manufacturing sector and the common man
  3. Control of black money by digitising the entire process and keeping track
  4. Custom duties are no longer charged on exports, making Indian goods more competitive in foreign markets

The Effect of GST Today 

  1. Variation in Prices 

The majority of goods and services are divided into five different tax slabs for collection of tax – 0%, 5%, 12%, 18% and 28%. In the last three years, different goods have fallen into different buckets, affecting the price you pay to have them. Everyday essentials like fruits and bread come under the 0% slab, while luxury items like dishwashers and automobiles come under the 28% slab.

Sometimes, the GST rates have been modified to boost certain sectors of the economy. For example, to stimulate the hospitality business, tariffs on hotel rooms were brought down one slab. On the other hand, tax on caffeinated drinks went up to 28% from 18%.

  1. GST for Businesses

The changes in rates mentioned above are likely affecting you as a consumer. What else should you know if you are a supplier? SME businessmen have a lot of benefits under various schemes.

One such scheme is the GST composition scheme, which lets you pay nominal taxes if your turnover is less than INR 1.5 crores. This is a useful scheme if you are a small businessman today since many are losing their jobs to automation and big players, not to forget the millions who have been forced to shut down due to the COVID-19 pandemic.

  1. Digital Shift 

The entire country has been experiencing a shift towards a digital and cashless economy in the last couple of years. All processes associated with GST registrations, payments, and filing of returns are entirely online, through the GST portal. This helps the authorities maintain a uniform and transparent system of taxation.

  1. GST Software

To aid the digital transition for SME businessmen, several companies like Khatabook give clear tax/GST guidelines and software solutions. GST software applications help you generate invoices, maintain records of all transactions, and as a consequence, hugely simplify the process of filing returns.

  1. Startups 

This is the era of startups, where entrepreneurship is heavily supported. However, different tax rules in different states across India add to the complications of starting a new company, but GST amendments have made it easier for you. A centralised registration process will make starting up and initial expansion much smoother.

New businesses are allowed to pay lesser taxes as well. Companies with a turnover of over than INR 25 lakhs (earlier 5 lakhs) have to pay a VAT charge, which varies from start to state, but increasing this threshold has exempted many startups. Moreover, based on the turnover, startups can pay tax every quarter instead of every month, which reduces the burden on them to pay tax and file returns.

  1. Logistics Industry

The logistics industry handles the movement of goods from one point to another. Under the GST Act, restrictions on inter-state movement of goods are eliminated, so goods can move between states without the hassle of paying different taxes in each state. This helps companies set up their warehouses at strategic locations where connectivity is maximised, instead of worrying about the implication of state taxes.

Conclusion

Despite the initial confusion and doubts about the GST Act, it has influenced the entire economy since its inception, and, as this article shows, continues to do so till date. You must be aware of the latest amendments which could affect you as an Indian taxpayer, irrespective of whether you are a producer or consumer. There are various tools to make the taxation process simpler and faster for you, and it is up to you to make use of these.

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