GST was implemented on 1st July 2018 and is popularly known as the ‘One Nation One Tax’ regime, which unifies the indirect tax structure across India. GST is taxed uniformly in the country, replacing several state and central indirect taxes. Propagating economic integration and GDP growth, GST is a tax levied on the goods and services sold in India, greatly benefiting businesses nationwide.
This post will explore some of the key advantages of GST taxes in India.
8 Advantages of GST in India
Let us look at some of the prominent advantages of GST:
- It Eliminates the Cascading Effect of Taxes
Earlier, there was a complex system of paying taxes in India, especially with multiple indirect taxes. GST has encouraged a common threshold for taxes (differs from state to state) and exempts businesses with a turnover of less than Rs. 20 lakhs
- It is Digitalised
From GST registration to invoicing to return filing, everything has been digitalised. Instead of relying on traditional methods, GST renders technological support with various digitalised services. It allows syncing of GST registration and PAN, helps track the movement of goods, and promotes the generation of e-way bills.
It further encourages a simplified return filing system with a quarterly filing option for businesses having a turnover of less than Rs 1.5 crore. Thus, GST taxes are a boon to Micro, Small & Medium Enterprises.
- It Offers the Benefit of the Composition scheme
Small and medium businesses with a turnover of Rs. 20 lakhs to 75 lakhs now have the leverage to lower taxes and reduce the tax compliance stress by utilising the Composition scheme.
- It is a Regulated and Systematic Process
GST has enabled a smooth transition of inter-state movement of goods, especially for e-commerce companies. This has redefined the inter-state supply of goods and regulated the internal functioning and taxation compliance of construction companies, textiles companies, online compliances, and instalments.
- It Offers Improved Competitiveness
GST tax regime has led to a reduction in transaction costs of doing business, improved competitiveness for the trade and industry, dismantling of inter-state check-posts, and reduced the cost of locally manufactured goods and services. This has eventually encouraged the competitiveness of Indian goods and services, reduced compliance costs, and empowered Indian exports.
- It Reduces the Rate of Non-compliance and Corruption
With a standardised, well-monitored, and digitalised GST system, businesses don’t feel the need to non-comply with the tax regime or evade taxes, like the way many used to do when there was a long list of state and central indirect taxes.
Each of the previously applicable indirect taxes had its returns and compliances. GST brought with it a unified return with only 11 returns under GST, including four basic returns. The chances of fraudulence have reduced, which has led to increasing levels of transparency between the government and businesses.
- It Is a Fair Mix of State and Central Tax System
GST can be of three types: CGST, wherein the Central Government collects taxes; SGST, wherein the state government collects taxes; and IGST, wherein the Central Government collects taxes on an inter-state sale. These types are designed to distribute the tax burden fairly between the Central and State Governments.
- It Encourages Foreign Investments
With the reduction in the liability of tax payments for businesses, India has drawn the attention of international businesses that were initially aversive to disparate taxes in India. GST has increased transparency, encouraged exports of Indian goods and services, promoted ‘Make in India’ production, and made the nation a lucrative investment avenue for foreign investors. Thus, it has opened avenues for foreign business investors to establish profitable ventures in the country.
With so many advantages of GST in India, the unified tax system adds value for all stakeholders at every stage of goods and services. It is a multistage tax regime that has replaced other indirect taxes to eradicate the cascading effect across the supply chain. It has promoted the seamless transfer of input tax credit, mitigated the cost of production and inflation, and made Indian trade and industry more competitive.
By broadening the tax base, GST gives businesses a unique tax-paying experience. Thus, every business needs to be GST-compliant and lead the regime to promote the overall growth and development of the country.