GOODS SERVICE TAX IS NOT THAT GOOD.
GST is trending now a days.Market nowadays is moving northwards on two things Monsoon & GST.If you believe that after GST running a business will become so easy then wait a sec!!! You need to read the GST act carefully.
We know that government acts and rules are very boring and cumbersome to read but when we read GST act we will come to know that it is not that biggest tax reform;it is going to be a biggest difficulty and a web which are going to create
GST has two motives
1-There are several taxes in the country which is the biggest hurdle in making India a common market.GST will ensure tax imposed on manufacturing; sales and services with a common rate due to which India will emerge as a common market place.
2-It will reduce inflation as there are different taxes -direct ,indirect which increases inflation. Apart from Custom Duty all parts of Taxes excise,service,vat,octroi,state and central direct and indirect taxes will be united whichWill decrease the rate of tax.With GST the tax levied from manufacturer or service provider at different stages will be vanished and there will be single tax to be levied on final product ,sales or service.which is expected to reduce inflation and will provide a very gentle tax administration framework which ultimately will reduce complexity.
With these reasons GST hopes are taking Market to a higher level.But GST is not going to fulfill all , in fact it is going to do almost Opposite to this.There are many provisions in this which will push backwards our tax systems instead of propelling in forward directions.For example let us take registration which is the basic aspect of taxation.If GST comes one has to do several registrations.According to GST act there are three layered taxes in it-State,Central and Integrated. One who supply or is selling to whole country has to do three registrations in every state and one has to file separate return from all three and take care of Taxes and also there will be infinite no of registration to be done.
Also if a company is doing several buisness then it has to do registration separately.
One more provisions is there that if a company send a product or service to its unit or branch then the tax will be imposed on unit and branch , the receiver will have to apply for tax return afterwards.
Now Input tax credit is the soul of GST.according to which during manufacturing or supply tax paid will be returned on raw material or service provided.This system will vanish Multiple Taxes on one final product or service but as per GST if the supplier does not pay tax to govt then the manufacturer who use the raw material from the supplier can not apply for tax credit-return.It will increase legal issues and notices.
In this three layered tax system there will be no stamp duty,no motor vehicle tax and tax on petrol diesal covered and even octroi in some states.The Rate of GST is most contentious.All type of direct and indirect taxes are around 24pct So it has toAround 18-20.so in turn service tax has to be increased by 4-6 pct.which can increase inflation.
In my opinion with such complexity the compliance cost for tax rules will also be increased. Now its the government can only tell that how the GST will ease tax system with infinite no. Of tax registrations.we all are hoping that with GST we will get advanced easy and long lasting tax system but this system will also open gate for complexity and dissatisfaction.
GST is trending now a days.Market nowadays is moving northwards on two things Monsoon & GST.If you believe that after GST running a business will become so easy then wait a sec!!! You need to read the GST act carefully.
We know that government acts and rules are very boring and cumbersome to read but when we read GST act we will come to know that it is not that biggest tax reform;it is going to be a biggest difficulty and a web which are going to create
GST has two motives
1-There are several taxes in the country which is the biggest hurdle in making India a common market.GST will ensure tax imposed on manufacturing; sales and services with a common rate due to which India will emerge as a common market place.
2-It will reduce inflation as there are different taxes -direct ,indirect which increases inflation. Apart from Custom Duty all parts of Taxes excise,service,vat,octroi,state and central direct and indirect taxes will be united whichWill decrease the rate of tax.With GST the tax levied from manufacturer or service provider at different stages will be vanished and there will be single tax to be levied on final product ,sales or service.which is expected to reduce inflation and will provide a very gentle tax administration framework which ultimately will reduce complexity.
With these reasons GST hopes are taking Market to a higher level.But GST is not going to fulfill all , in fact it is going to do almost Opposite to this.There are many provisions in this which will push backwards our tax systems instead of propelling in forward directions.For example let us take registration which is the basic aspect of taxation.If GST comes one has to do several registrations.According to GST act there are three layered taxes in it-State,Central and Integrated. One who supply or is selling to whole country has to do three registrations in every state and one has to file separate return from all three and take care of Taxes and also there will be infinite no of registration to be done.
Also if a company is doing several buisness then it has to do registration separately.
One more provisions is there that if a company send a product or service to its unit or branch then the tax will be imposed on unit and branch , the receiver will have to apply for tax return afterwards.
Now Input tax credit is the soul of GST.according to which during manufacturing or supply tax paid will be returned on raw material or service provided.This system will vanish Multiple Taxes on one final product or service but as per GST if the supplier does not pay tax to govt then the manufacturer who use the raw material from the supplier can not apply for tax credit-return.It will increase legal issues and notices.
In this three layered tax system there will be no stamp duty,no motor vehicle tax and tax on petrol diesal covered and even octroi in some states.The Rate of GST is most contentious.All type of direct and indirect taxes are around 24pct So it has toAround 18-20.so in turn service tax has to be increased by 4-6 pct.which can increase inflation.
In my opinion with such complexity the compliance cost for tax rules will also be increased. Now its the government can only tell that how the GST will ease tax system with infinite no. Of tax registrations.we all are hoping that with GST we will get advanced easy and long lasting tax system but this system will also open gate for complexity and dissatisfaction.
