Vat was introduced into the Indian taxation system from 1 April Vat is a significant improvement over the local sales tax system. At the state level the advantage of vat is that it is a multi-point tax with set-off for tax paid on purchases and it prevents repeated taxation of the same product.
A huge change like GST requires a constitutional amendment, which requires a bill to passed in both houses of Parliament. The biggest indirect tax reform sinceGST bill is expected to bring about an economic integration of the Indian economy. GST will help consolidate and streamline the process of indirect taxation and make it easier and more effective.
This tax will be levied on manufacture, sale and consumption of goods as well as services at the Central and State government levels. Most of the developed countries use this form of taxation for ease and convenience and to avoid double taxation.
GST would be payable on price actually paid or payable, termed as "transaction value", which will include packing cost, commission, and all other expenses incurred for sales.
This tax will be payable at the final point of the consumption. Except the Tamil Nadu government, which believes that this bill will take away the autonomy of the State government, all other States are in support of the bill.
GST is deemed to benefit all businesses in India, but small businesses can rejoice for the following reasons: Ease of starting business: Any new business needs to have a VAT registration from sales tax department. A business operating in many States has to face a lot of issues regarding the different procedures and fees in each state.
GST will bring about a uniformity in process and centralised registration that will make starting business and expanding in different States much simpler. Higher exemptions to new businesses: GST will make this limit higher, to upto Rs 10 lakh and, further to it, businesses with turnover between Rs 10 and 50 lakh will be taxed at a lower rates.
This will bring respite from tax burdens to newly established businesses. Currently, a startup spends a lot of time and energy to manage the various taxes at various points. Adhering to different regulations at different States make the process very complex.
GST will simplify the process by integrating all taxes, making the process of paying tax simpler. Respite for businesses in both sales and services: Businesses like restaurants, which fall under both sales and service taxation, have to calculate the VAT and service tax on both items separately.
This makes the calculations process very complex. GST will not distinguish between sales and services, and thus the tax calculation will be done on total. Reduction in logistics cost and time across States: Many transport vehicles get delayed during movement across States due to small border tax and checkpost issues.
Interstate movement will become cheaper and less time consuming, as these taxes will be eliminated. This will also bring down costs associated with maintaining high stocks, as there will be undisrupted movement of goods.
As per a CRISIL analysisGST can reduce logistics costs of companies producing non-bulk goods comprising all goods besides the primary bulk commodities transported by railways - coal, iron ore, cement, steel, food grains, fertilisers by as much as 20 percent.
GST to assist curb the fiscal deficit GST is expected to bring economic integration in the country and a boost in GDP growth, bringing down the fiscal deficit. How does GST reduce the cost of doing business? Unlike VAT and service tax, GST is essentially a tax on value addition at each stage, and levied at point of sale and not purchase.
This means that the consumer bears the GST charged by only the last dealer in the supply chain, thus making it cheaper for the consumer and increasing the profitability of his business.
Secondly, there are various other taxes levied by the Central and State government on production, manufacture and distributive trade, where no set-off is available in the form of input tax credit. These taxes accumulate and lead to increasing the cost of final product which the consumer has to bear.
GST subsumes all these taxes which are set off at each stage starting from producer and ending at the retailer, thus easing the burden on final consumer. GST will assist in bringing down fiscal deficit by boosting tax collection and simplifying the tax regime, which is expected to bring about better compliance.
Thus, a win-win situation both for the government and the tax payers, a situation quite unheard of. Conclusion Critics of GST argue that implementation of this tax will lead to losing the fiscal autonomy of the States and cause permanent revenue loss.
For a manufacturing State like Tamil Nadu, if taxes are levied at the point of purchase point of destination and not on point of sale point of originit can lead to permanent losses close to the tune of Rs 9, crore.One of the primary goals of a taxation regime is always avoidance of â€œcascading-effectâ€ of the incident taxes as it adds to the deadweight loss i.e.
slump in total surplus of supply chain consisting of supplier, manufacturer, retailer and consumer. However, this does not constitute a valid reason that justifies the cascading effect of taxes.
For the people, it makes no difference if a tax is levied by the Centre or the State – . Cascading effect of taxes hits manufacturers as they are unable to bring their manufacturing costs down; similarly, retailers, distributors and dealers of the goods and services are hit in a domino effect as they are also unable to claim any credit on these taxes levied – this finally leads to an increase in the total cost of the product when.
Jun 22, · Cascading Effect of Taxation Cascading effect of taxation is one of the major problems in the current indirect-taxation regime. It can be simply understood as tax-on-tax. One of the primary goals of any taxation regime is to avoid “taxation over taxes”. Cascading Effect of Tax in India CASCADING EFFECT OF TAX IN INDIA Mahadev.R The purpose of this article is to throw light on the cascading effect of taxation present in India and its impact and the possible remedy for the issues arising from the same.
Eliminates cascading effect of tax GST has subsumed more than a dozen taxes that existed before the new tax regime.
This helps in eliminating the cascading effect of taxes.