Wednesday 1 July 2015

Impact of GST on the Common Man

Any regulation change in taxation usually either means more taxes or difficult procedure. Either ways such kind of change in regulation is usually opposed by people. However the proposed Goods and Service Tax regulation is aimed at simplifying the current taxation structure and reduce the cost of total tax borne by end user. Convenience to the honest tax payer and disincentivising the tax evaders are two major benefits of this method of taxation.

To explain in a nutshell, when you purchase goods from one state you pay sales tax (CST) and when you  sell that goods in another state you have to pay VAT again. So there is a “double taxation” of the same goods and of the same transaction as you do not get credit of tax already paid. What GST aims at is in the above situation you have to pay tax only on the increase in sales value and you get the credit of the tax you have paid while purchasing.

Biggest benefit will be that multiple taxes like  central sales tax, excise duty, service tax state sales tax, entry tax, entertainment tax, luxury tax, turnover tax etc., will no longer be present and all that will be brought under the GST. Apart from the avoidance of double taxation the biggest benefit is to reduction of compliance costs. The paper work is going to be reduced as there will be single authority to file returns, assessments and appeals. So unproductive work like maintaining separate records, meeting different consultants and complying with different departments will be reduced.

This is a tremendous benefit to any size of business and in particular National players. These tax savings eventually get passed on to consumers. Moreover small businessmen will get input credit of taxes they pay on varied services. As of now Service Tax paid was not used as a credit for payment towards Central Sales Tax. However in GST you can take benefit of service tax paid on telephone bills, AC service charge, computer AMC, Internet expense etc.

Doing Business now will be easier and more comfortable as various hidden taxations will not be present. Starting a new business will be easier and hence the consumers will have the luxury of multiple choices for whichever goods or services he wants. This automatically keeps prices in check and ensure that the benefits of decreased taxes be passed on to the end users.

The rate of tax may seem high and for the first year end consumer may have to pay higher tax, however after the first year the tax burden will reduce. Combined with increased competition, no double taxation and reduced paperwork – end user is definitely going to reap the dividends.
Overall GST is the change India needs today to see a better tomorrow.



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