GST Benefits in India – Advantages of GST in India

Pramit Pratim Ghosh |Updated on: September 13, 2022

• Introduction
• GST Benefits
• Conclusion

Introduction

The journey of GST started way back in 2000, when the Atal Bihari Vajpayee government first thought of exploring the avenues of GST in the country. 14 years later, the potential GST Bill benefits were brought up for discussion once again, ultimately leading to GST becoming the law of the land by the President’s assent on 8th September, 2016.

While every change has its pros and cons, GST is no different. However, it is expected that one will be able to see significant GST benefits for the common man, as well as for the business community, in the long run.

However, as we have embraced GST on 1st July, some of the immediate GST advantages are as follows:

GST benefits

• Elimination of cascading fffect of taxes 

GST subsumes most of the indirect taxes being levied across the country, thus eliminating the “tax on tax” effect which has been plaguing the supply chain and increasing costs for the end user.

• Seamless flow of input tax credit

The seamless availability of Input Tax Credit will actually encourage suppliers to pay taxes, bringing down the tax evasion level as well as that of tax corruption

• Common market -

GST will effectively dissolve state boundaries, as the same tax rate prevails across the entire country. Also the removal of Central Sales Tax (levied earlier on inter-state sales) and the removal of VAT (different in different states) will mean that the entire country will become a level playing ground for all businesses.

• Better days for underdeveloped dates

GST being a consumption-based, destination based tax, it will provide a huge boost to consumption heavy states, who can now utilize the revenue jump to focus on industrialization and manufacturing.ill not be required to use HSN codes

• Technology led law

 GST has been designed in such a manner than compliance will now become largely based on technology. The reduction of human intervention will make the process much more transparent, corruption-free and efficient.

Advantages of GST

• Unified Indirect tax structure across the nation
• Removes cascading of taxes
• A common procedure for filing returns or other documents, unlike in the pre-GST era
• A single tax structure instead of multiple tax structures like VAT, Service tax Excise etc.
• Technology being the backbone of GST, it aims to simplify business compliance.

Eliminating cascading effect under  GST

In the current regime of indirect tax system, the chain of input credit is broken at a certain point. Let’s say Central Sales Tax (CST) applicable on interstate trade is non-creditable, leading to a break in the input credit chain. Similarly, a manufacturer charging excise duty on sale to a dealer causes the chain to break. This leads to taxes forming a part of the product cost.

In 2005, VAT was introduced with a similar objective to overcome the cascading effect. It eliminated the cascading tax effect on the state indirect tax, while the cascading effect of other indirect taxes still remained. GST allows for a seamless flow of tax credit and eliminates the cascading effect of all indirect taxes in the supply chain from manufacturers to retailers and across state borders. 

FAQs on GST

What are the benefits of GST

• Elimination of Cascading Effect of Taxes
• Seamless flow of Input Tax Credit
• Technology-led law
• Common Market Place

Is GST good or bad?

GST is a good change, replacing the multi-tax indirect structure prevailing in the country. Among the several good things, the seamless flow of input tax credit across the nation ensures the benefit of price reduction is passed on to the end consumer.

Is GST good for India?

Yes, it benefited the economy in several ways, such as common market place, enhancement in exports, increased revenue to Government, reduced tax evasion etc.

Conclusion

Apart from the obvious benefits of GST - elimination of cascading effect, simplified compliance, technological backing and uniform process across India – one of the major GST bill benefits is bound to be the ease of doing business. However, the success of a business will significantly depend on the ability to understand this change and bring about the relevant changes in the business processes to keep growing as well as stay compliant. That will truly ensure ample benefits of GST to consumers as well as businesses, which in turn will take the nation forward.

Watch Video on GST Benefits: How Does GST Eliminate Tax on Tax