Implemented in 2017, the Goods & Services tax significantly combined and simplified India’s complicated taxation structure. This unified tax regime has been introduced to eliminate all the indirect taxes that were applicable on goods and services levied by the Central and State Governments at numerous stages.
Moreover, this destination-based tax states that all taxes levied on the process of production will be refunded. Besides, it has marked a significant impact on every sector and eliminated the descending effects of the tax. To understand the concept in detail, individuals need to take a look at the advantages of GST in different aspects.
GST advantages to look at in 2022
The implementation of GST has had noteworthy impacts on the Indian economy. Traders and manufacturers significantly benefited from this taxation. Under this new tax reform, the price of goods and services was significantly reduced, boosting the Indian economy.
Nonetheless, here are some of the essential pros of GST that individuals need to learn and understand in detail:
Elimination of declining tax effect
The era of pre-GST witnessed a descending effect of taxes, now unified into one taxation system after GST implementation. It removes multiple taxes on a similar product and improves the fluidity of the taxation process. Following is an example related to the cascading effect of tax before and after GST implementation:
- Pre-GST: For example, an owner of a hotel charges Rs. 60 000 for staying 5 days at his hotel. Here, he will have to pay a service tax of 15%, which will be (60, 000×15%) = Rs. 9,000. Moreover, he provides toiletries for Rs.25, 000, costing an additional VAT of (Rs.25, 000 x 5%) = Rs.1250. So, the overall amount paid by the hotel owner is Rs.10, 250
- Post GST: Since the tax imposed on the services is 18% and the new tax value will be (Rs.60, 000×18%) = Rs.10, 800. The tax charged on the toiletries will be deducted from the main tax amount. So, the final tax amount will be Rs.8, 550
Increased threshold limit
Before the introduction of GST, businesses had to pay taxes when exceeding the limit of Rs.5 lakh. However, this amount varies across states, and post the implementation of GST, the threshold amount has been raised by Rs.15 lakh, and the new limit is Rs.20 lakh. This increase in the VAT threshold limit is a significant relief for SMEs and MSMEs.
Reduced tax compliances
One of the significant GST advantages is the minimized tax compliances. For instance, if an individual had to file an excise tax return, it had to be done monthly. Moreover, the organizations and LLPs were required to file service taxes, and partnerships and proprietorships had to file them every quarter. Likewise, the period for VAT filing varied across entities. However, with this unified tax regime, individuals need to file taxes only once.
Prompt and hassle-free online processing
Another crucial advantage of the GST reign is that one can file returns online. To file for an online GST return, individuals need to visit the GST portal, create an account, login and start filing. With a smooth interface, filing GST returns is simple.
Moreover, individuals can collect all necessary details like how to register for the GST online, GST laws and jurisdictions and the like from the portal itself. This GST portal significantly benefits the start-ups as it is convenient to ensure transparency among different tax jurisdictions between Central and State Governments.
Now that individuals know the benefits of GST, they need to file taxes on time. If they need business loans, these documents will be essential for the entrepreneurs to submit and acquire their preferred loan amounts.
Moreover, borrowers can also bypass the hassle of extensive documentation with the help of pre-approved offers rolled out by leading financial institutions like Bajaj Finserv. By availing of these offers, loan applications have accelerated and simplified. Moreover, borrowers can check their pre-approved offers by mentioning their names and contact details online.
Nevertheless, before applying for such loans, individuals must know how to calculate GST by using a GST calculator. With the help of this online tool, individuals can determine the tax amount they must pay to the Government.
To sum it up, with the above explanation, it is clear that GST advantages are beneficial for both businesses and consumers. This new tax regime has positioned the country well in the international market and positively impacted the economy.