Two-year-old ‘One Nation One Tax‘ governance is near to what a modern tax system looks like. A single Goods and Service Tax (GST) has confined all the hundred returns a taxpayer used to file before under fewer segregations. The set of unbiased regulations preserved and followed under this single indirect tax mechanism has eliminated the cascading effect of taxes done during the production or distribution of goods and services.
Tax Cascading
Under cascading of tax, the tax liability is added on at each stage of the transaction and is paid by the ultimate purchaser.
No process is ideal. Everything comes with its own set of pros and cons but for a system to be close to perfect, the list of cons has to be shorter than the list of pros.
Advantages and disadvantages of this single indirect tax mechanism (GST):
Various Benefits of GST
Tax cascading is concrete in India for years. The tax cascading brings ultimate tax liability to the person who is the final consumer of goods and services. With the GST being the new ruler in the India tax administration, there is no room for tax on tax policies. Erasing the tax on tax effect from the rule book is one of GST’s popular achievements.
List of benefits companies can avail once they are registered under GST :
Reduced tax – Concerned with a manufacturer of goods and services, a certain amount of tax that is paid by them on the raw materials can be retrieved once the tax is levied on their product. The final tax payable is less which means the supplier has to pay a lesser charge for the goods he supplies and so the consumer.
Preventing Tax evasion – The provider can avail of Income Tax Credit on the entry tax for which he has to mention the appropriate elements in the bill. So the credit can be availed only when the provider is loyal with his product entries, thus preventing any tax leakages.
GST – A transparent mechanism – GST seeks complete information of the transaction. Whether he is a producer, supplier or final consumer, they have to mention the correct details of the transaction while filing their returns in order to avail of the benefits extended under the provisions of the GST system.
Centered to benefit Small Businesses – Provisions under GST has contributed to the welfare of small businesses. If we look at the compliance side, the tax weight has been reduced for small businesses. Further, the introduction of the composition scheme has allowed small taxpayers (with an annual turnover of 20 to 75 lakhs) to pay an amount fixed on their income.
Increased Threshold Limit – The administration under VAT claimed tax from the businesses with an annual turnover of Rs. 5 Lakhs or more whereas the laws under GST put in the liability of paying tax on business with an annual turnover of Rs. 20 Lakhs or more. Thus reducing the burden of tax payment from small businesses.
Fewer Returns to File – Earlier to GST, there was separate compliance for every tax that was levied on the taxpayer. For instance, filing carrier tax was mandatory for businesses every month or in 4 months and month-to-month excise returns had been made.
Reduced Custom Duties – The tariff on exports have been reduced since GST has come to power which is a clear benefit for those who want to grow their business by exporting their products to another city, region, or country. Opposite to the previous tax regime, the operating value has been lowered and the logistics ended up higher.
Increased Accountability – With only a single indirect tax being imposed under GST, industries such as fabric and creation have become more organized and accountable towards their tax compliance. The government has made it convenient for them to meet their tax compliances.
Flaws of Goods and Service Tax Mechanism
A short term instability in certain provisions of GST bothering the government and taxpayer. Under GST, a business has to pay more on its operations (as tax is levied) and the revived amount (in the form of ITC) is in a less percentage.
Another short term disadvantage is that the business has to invest in teaching its backend support the GST compliance laws. This calls for hiring a GST specialist.
Yet there are many options on the market that might assist you with the monthly, quarterly or annual GST compliance but in the end, one needs an efficient source to rely upon with tax compliances. Suggested here is the tax compliance software from SAG Infotech – the company in the market for 2 decades dedicatedly serving its clients with effective and updated Genius tax return filing software along with Gen GST software for GST return filing and billing compliance.
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