GST is a broad-based, comprehensive, single indirect tax which will be levied concurrently on goods and services across India. GST is dual based where taxes would be levied by both the Centre and the State. CGST and SGST would be charged in case of intra-state transactions i.e. transactions within the same state and IGST would be charged in case of inter-state transactions i.e. transactions within two different states.
The main objectives of GST are to eliminate the cascading effect of taxation and bring uniformity in the tax policy across India. This shall enable creation of a common market. The benefits of GST shall be huge. Elimination of region wise distortion in tax policies shall enable the decision making from purely an economic point of view. Elimination of cascading effect shall gradually result in price reduction in the economy and shall also expand the tax base. Exports shall get a very good boost as many hidden taxes which are currently not refundable and hence adds to the cost shall be eliminated under GST regime. Thus goods and services shall be exported and not taxes.
Impact on your business
1. Ease of Starting a Business
2. An Easy Regulatory Mechanism
3. Higher exemption to new business by extending the limit up to 25 lakhs which will bring down the tax burden to newly established business.
4. GST will make the process of paying tax simpler by merging all taxes of different states.
5. In GST, there is no difference between sales & services and thus tax will be calculated on total basis.
6. GST will reduce the logistic cost of the company producing non-bulk goods by 20%.
7. GST eliminate the cascading effect of multiple Central & States taxes.
8. GST is a destination base tax system i.e. the liability to pay tax is only generated after the goods/ services reach to the customers.
9. GST bring down the fiscal deficit, boost GDP & bring economic integration in the country.
10. GST is levied only at the point of sale & not on the purchase i.e. levied only by the last dealer and make the product cheaper for the final consumer.
As every coin has two sides, apart from the benefits mentioned above, GST shall also bring some challenges. Existing way of doing things will have to change. As GST is a business reform and not just a tax reform, all the decisions made by a businessmen shall require reconsideration keeping GST in mind. For example, instead of keeping warehouses in every State, it shall be advisable to go for centralized warehouses which shall lead to savings in cost. Pricing analysis of the products and services shall be required to be considered under the GST regime as many taxes which were hitherto a cost shall not remain. Even the ERP accounting systems will have to undergo changes as per the requirements of GST. Last but not the least, liquidity position (cash flow) of the businesses shall be affected as supply even to a branch shall result in GST liability and hence blockage of funds