In the year 2017, the Government of India passed the Goods and Service Tax Act or GST ACT in India, and it was brought into effect from 1st July 2017.
The said act has resulted in the implementation of one indirect tax on India as a whole and has laid a great impact on the country’s economy. The act was launched as an undertaking that would help stimulate economic growth and to get rid of cascading taxation.
To understand how and why GST influences the economy, individuals first need to learn about what is GST in general and its associated benefits.
The said tax is charged on goods and services and follows a multi-stage taxation procedure that is applied on each step of value addition or transaction.
Advantages of GST
By analysing these advantages of GST one can attempt to understand the impact it has on the Indian economy –
- Elimination of complex indirect taxation methods like VAT, Service Tax, Excise, CST, etc.
- Simplification of existing tax structure and eliminating its cascading effect.
- Reduction in the cost of manufacturing would help bring down the cost of FMCG products.
- Increase in the purchasing power of individuals would directly help to increase demand and supply of goods and services.
- Being a technology-driven endeavour, all GST-related procedures like GST registration and availing a GSTIN can be completed online, making the process hassle-free.
Business individuals should learn about all the information they need to know about GST to help generate more earnings through effective tax savings.
Additionally, they should learn about the different GST rates in India, to find out which one applies to their venture and also to avail accurate input tax credit on the same.
Opportunities for business owners
GSTwill limit the need for regular tax consultations and offer more freedom to execute their business operations more independently.
With the introduction of GST, business owners are now liable to pay less tax on multiple goods and services in comparison to the previous traditional indirect taxes. GST directly helps business owners to save up to 32% of their revenue and other additional fees.
This advantage of availing tax credit would act as an encouragement for business owners to expand their business venture, which they were hesitant to avail previously. Such hesitance usually arose due to the involvement of several taxes and charges.
You can either choose to expand your existing business or start a new one by seeking their financial assistance.
Impact of GST on the economy of India
The impact of GST on small and medium businesses tends to serve as an indicator of how it affects the economy as well.
The following highlights how the same is manifested –
- A decrease in the producer’s tax burden and advantage of tax credit helps accelerate production process and help them reach their optimum production level.
- Customers are more informed about the taxes they are paying and how they are being charged for the same.
- GSTwill increase Government revenue, thus boosting the nation’s economy.
- The removal of customs duties on export duties courtesy GST would enhance the competitiveness of Indian goods overseas.
As for its shortcomings, GST has its share of challenges whose effect is ultimately borne by the end-consumers. Financial experts suggest judging the outcome of this GST implementation with an eye towards the future.
Business individuals can take the advantages extended by GST in the meantime. They should be familiar with the basics of how to file GST returns, replacing the previous double taxation issue with tax returns. Know how to calculate GST and take advantage of this taxation regime to fulfil your business aspirations.