The government levies direct or indirect taxes on the generated income and goods & services respectively. Direct taxes are returned by salaried class based on the configuration of the budget of the fiscal year. However, all the consumers of goods and services are liable to pay indirect taxes. It is a practice implemented to generate revenue for national development. Nonetheless, some economists argue that indirect taxes might contribute to building an inefficient marketplace. A simplified GST system simplifies the business’s functioning more effectively. It has eliminated old tax regime challenges significantly.
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GST FUNDAMENTALS
- Goods and services are routinely consumables that are taxed at a specific interest rate.
- GST (Goods & Services Tax) has proved to be the largest reform in the country.
- GST comprises excise duty, VAT (value-added tax), services tax, and other taxes.
- The Indian Parliament passed the GST bill on March 29, 2017, and was enforced from July 1st, 2017.
- Goods and services law is a comprehensive and multi-level tax imposed on every value addition.
- It is an indirect tax levied on domestic goods and services.
EXCEPTIONS ON LEVYING GST
- GST functions on a dual structure controlled by the state and central government. Both the bodies have the power to impose a tax on any goods and services.
- CGST and IGST taxation is administered under the central government while SGST or UTGST taxes are levied by state governments. Every purchased item is taxed for GST amount and that’s where the GST calculator in India steps in for an accurate evaluation of tax payment.
- Special Economic Zones (zero-rated supply) are exempted from GST on any supply of goods or services in such areas. In such circumstances, the exporters get back taxation by claiming a GST refund.
- For the determination of the nature of supply, there are different laws incorporated under GST laws. Inter or intra-state supply transactions are specified based on the location of the suppliers.
- After the incorporation of GST laws in 2017, the GST rates have been revised several times. Under the influence of the pandemic, the tax rates from two medicines were withdrawn temporarily and other essential items got relieved from the tax.
BENEFITS OF GST PLAN FOR BUSINESSES
- Establishes a trusted relationship
In the global network, the ratio of direct to indirect tax in developed countries is greater than in developing countries. Governments of most of the developed nations collect major tax returns directly. While the developing countries are compelled to generate revenue from indirect taxation.
The implementation of the GST bill has created transparency thereby building trust among the companies. This reform has transformed business practices.
- Taxation for MSMEs
Since the government imposed GST for the simplification of existing tax regimes, widening the tax base, and extending the revenue generation margins. GST was introduced to eliminate the double taxation system. The Indian economy is boosted with the significant 50% contribution of around five crore small and medium enterprises (SMEs).
For seamless economic sustainability, SMEs owned new tax regimes. GST plans have impacted different business verticals in multiple ways.
- Easy business setup
With the GST rules, entrepreneurs can start a business easily with effective management. Under previous tax regimes, the businesses were imposed VAT that varied in every state. The businesses in wealthy states had to pay more taxes on the services. Moreover, the VAT registration process was a tedious task.
GSTs rolled out the business starting procedures in an effective manner. To establish a business, the companies must have to register themselves for GST taxation.
PURPOSE OF GST FOR TAXPAYERS
- Perplexed by multiple taxations at the central and state level, the taxpayers had no robust tax return plans. Under the ‘one nation, one tax regime, all the excise duty or VAT taxes have been clubbed into GST making it an elementary tax filing process for the taxpayers.
- With one taxation, there has been easy exportation of the goods and services overseas. Integrated goods and services tax exempts the manufacturers from paying CST (Central Sales Tax) and other taxes. Single tax department reduces the tax laws.
- GST laws include anti-profiteering provisions to keep the consumers safe and secured. Reduced tax rates on the supply of goods and services benefit the customers.
ANTI-PROFITEERING PROVISION
Anti-profiteering provision is introduced in the GST laws with the aim to impede the chances of scaling prices. Also, it ensures the reduced tax credit benefits are provided to customers as well. The respective authority acts against the filed complaints of profiteering and the profiteering supplier has to reduce the price. Buyers get profitability with 18% interest.
The suppliers of goods and services pass on the reduced interest rates to the consumers.
Statutory Laws:
- Anti-profiteering laws are enforced under section 171 of the CGST act, 2017, and CGST rules from 123-127 are implied.
- Consumers will be safeguarded from not availing the advantages of tax rate reduction on any supply of goods and services. If it’s not accomplished, the National Anti-Profiteering Authority protects consumers’ interests:
- Price reduction
- Imposing penalty
- Return amount at 18% interest rate
- Registration repealing of the supplier
IMPACT OF GST ON RETAIL INDUSTRY
GST has lowered the tax burden on retailers. Streamlining the tax filing issues, the new tax regime has helped retailers to understand the taxation. GST laws have revolutionized the retail sector. Upon one-time registration, the supply chain processes are carried out that saves the costs for retailers. Glorifying the efficiency of the retail businesses, GST has eliminated the difficulties for the transportation of goods and services in inter-state boundaries.
The retail industry is accountable for more than 10% of India’s GDP. Single taxation has allowed the unification of the markets that results in the expansion of the businesses in multiple states. It contributes to the significant growth of the retail industry.
BOTTOM LINE
Since the incorporation of GST rules, various business sectors have scaled their profitability. Tax exemption laws have extended the profitability of the retailers such as transportation cost reduction. If any supplier doesn’t pass on the tax reduction benefits, the anti-profiteering laws act against them to safeguard consumers’ interests.