More than a year has passed since the Goods and Service Tax (GST) was passed by the Parliament in a historic joint session conducted at midnight. The intervening period was marred by poor implementation and severe shortcomings in the GST network but the Government of India has tried to address all the problems. The process appears to be smoother now with some clear benefits of GST for the Indian economy becoming evident or expected to emerge in the near future.
1. Inflation Under Control
Contrary to fears that the rate of inflation would rise because of the new tax system, it did not happen as the multiple slabs ensured that the rate for most items including those for essential commodities remained similar to the existing charges. A lot of critics had trashed the multi-slab structure but it was the reason which helped in keeping the prices under control and even though the slabs may change in coming years, the impact on inflation is expected to be the same.
2. No Cascading Effect
The multitude of taxes like sales tax, service tax, VAT etc. earlier meant that the cost of a product rose after all of them were added to its price and with the new regime subsuming most of these levies, the cascading effect earlier was seen has vanished. Not only does this help consumers with reduced shopping bill but it also is a big relief to manufacturers and other businesspersons with the tax credit benefits provided at various stages of the chain.
3. Ease of Doing Business
The new structure by incorporating a lot of levies has also helped entrepreneurs by reducing their compliance requirements. They do not have to keep track of and file for various conformities with different agencies reducing their burden of paperwork. Additionally, with state check-posts gone the logistics are also bound to improve as in addition to speedier delivery of merchandise there is no need for warehouses in every state for saving taxes and instead can be located strategically.
4. Increase In GDP
The merchants with improved business environment can employ their resources towards better productivity and with prices expected to fall, it will result in increased consumption which in turn will translate into a high GDP. The Gross Domestic Product (GDP) is the chief indicator of the economic health of a nation and a good rate will attract more investors towards the country.
5. Better Revenue Collection
The unified taxation reform is expected to help in augmented revenue collection because of a widening tax base as more users are added to the online network. The technological glitches being sorted out will see a rise in the compliance figures and with the reforms providing an impetus to growth, the numbers will only improve in days to come.
6. Transparent Process
One of the biggest advantages of GST for the Indian economy is the complete transparency in the online structure accompanying it. The process witnessed a lot of teething troubles and became a massive headache for everyone involved but over the last 12 months, it has shown improvement and is bound to prove beneficial in the long run as it has minimized the scope for corruption and tax evasion considerably.
7. Regulation Of Unorganized Sector
Every member of a business chain whether or not eligible to pay taxes had to one or the other way apply for online GST registration in India meaning that the huge unorganized sector of the country’s economy was brought under regulation. The individuals and organizations belonging to this category cannot evade the registration as the corporation they are supplying to may lose out on benefits and stop using their services.
8. Benefits For Small Businesses
The threshold limit has been kept at Rs 20 lakhs (Rs 10 lakhs for special states), exempting many small traders and service providers. Individuals whose commercial activities generate an annual turnover less than Rs 1 Crore (Rs 75 lakhs in some states) can take advantage of the composition scheme which helps in paying at a lower tax rate along with lesser compliances.
9. Competitive Business Environment
A singular feature of mature economies is the healthy competition between corporations for capturing a large market base by working towards better products and manufacturing systems. The convenient changes due to GST will create good market conditions and in order to attract consumers, industries will start investing in advanced technologies. While helping the economy, it will also assist the nation in becoming a leader in some business sectors.
10. Rising Employment Rate
The new structure freeing most enterprises from compliance and logistical encumbrances will assist in generating higher production rates to keep up with increased customer demands fuelled by low prices. It is natural to see a growth in hiring figures as most organizations will have to invest in manpower to ramp up their production capabilities in order to meet the demands.
The government needs to constantly monitor and streamline the processes apart from conducting timely modifications keeping concerns of the taxpayer in mind so as to multiply the advantages of GST for the Indian economy.
George Dille is an Expert in Business at BusinessVenturesIndia Ltd, a company that provides new company registration in India in convenient manner. He is a passionate writer and loves to share Business tutorials.