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ARN. No. KLI/23-24/E-BB/1201
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Ref. No. KLI/22-23/E-BB/999
Whether you are a taxpayer seeking to decode the complexities of filing returns or a curious mind eager to learn about GST tax reform, this article aims to be your guiding light.
Among the numerous tax reforms that have shaped economies worldwide, India’s Goods and Services Tax (GST) stands as a true game-changer. This paradigm shift transformed the nation’s tax structure and altered the course of its economic journey.
The Goods and Services Tax has been hailed as a transformative force, simplifying tax compliance, fostering a vibrant business ecosystem, and bolstering the vision of “One Nation, One Tax.” Yet, it has also faced its share of criticism, with questions raised about its impact on various sectors, its complexities, and its challenges.
In this blog, you will explore the advantages of GST on these items and how it positively impacts both consumers and businesses alike.
GST is an all-around indirect tax imposed on the supply of goods and services all over India. Introduced on July 1, 2017, GST has simplified the complex web of previous taxes and brought significant benefits to various sectors, including household appliances, phones, and daily consumer goods. Let us take a quick look at the history of GST and how it came into existence.
The Kelkar Task Force on Indirect Taxes first suggested the idea of a national GST in India in 2000. The goal was to replace the current complex and fragmented tax structure with a unified system that would make compliance easier, lessen tax cascading, and encourage economic integration. The First Discussion Paper, developed by the Empowered Committee of State Finance Ministers, was published in 2009. The 2011 introduction of the Constitution Amendment Bill was met with opposition over issues such as state compensation.
GST laws went into effect on July 1st, 2017, replacing a complex network of Central and State taxes. The Indian GST divides goods and services into four different tax brackets: 5%, 12%, 18%, and 28%. The new GST rates list can be viewed on the official website of the Indian government.
With its far-reaching implications, GST has revolutionized how government collects revenue, streamlines trade, and fosters an environment of fair taxation.
Let us explore different benefits that come along with GST:
Before GST, the Indian tax system was plagued with a labyrinth of taxes like VAT, excise duty, and service tax, leading to a cascading effect of taxes that burdened manufacturers, retailers, and consumers. GST streamlined this tax structure by subsuming multiple taxes into a single tax, making it easier to understand and comply with. As a result, manufacturers and suppliers can now focus on innovation and cost-saving measures, which ultimately benefit consumers by lowering prices.
Previously, goods were taxed multiple times as they moved from the manufacturer to the retailer, accumulating taxes at each stage. This tax-on-tax effect increased the overall cost of the product. With GST rates, the cascading effect is eliminated as the tax is only applied to the value addition at each stage of the supply chain. Consequently, this leads to reduced prices for household appliances, phones, and daily consumer goods, making them more affordable for the average consumer.
One of the most significant GST benefits for businesses is the Input Tax Credit (ITC) mechanism. Under the ITC, businesses can claim credits for the GST paid on their purchases and utilize it to offset their GST liability. This encourages businesses to source raw materials and inputs from GST-compliant suppliers, which fosters a more organized and formal economy. As a result, manufacturers can pass on the benefit of reduced tax liability to consumers in the form of lower prices for goods.
GST has eliminated inter-state barriers and harmonized tax rates, resulting in a more uniform tax structure across the country. This has encouraged manufacturers to expand their operations and set up warehouses strategically to optimize supply chain efficiency. With reduced logistical costs, companies can offer their products at competitive prices, thus creating a more competitive market that ultimately benefits consumers.
The introduction of GST has also significantly boosted the e-commerce sector. With simplified tax compliance procedures, businesses find it easier to operate online and expand their reach to consumers in different states. Additionally, the removal of entry tax barriers has facilitated the smoother movement of goods across state borders, further enhancing the e-commerce ecosystem. As a result, consumers now have access to a broader range of household appliances, phones, and consumer goods at competitive prices through online platforms.
GST has brought transparency to the tax system, reducing the scope for tax-related evasion and fraud. With an efficient online portal and real-time tracking of transactions, the government can better monitor compliance. This enhanced transparency instills confidence in consumers, as they can be assured that they are paying the correct taxes on their purchases. Moreover, increased compliance leads to higher tax revenues for the government, which can be utilized for various welfare initiatives.
The simplified and transparent tax structure of GST has significantly curtailed the prevalence of black-market activities. Previously, high tax rates encouraged sellers to evade taxes and operate in the unorganized sector. However, with GST’s lower tax rates and ease of compliance, the incentive for engaging in black market activities has diminished. This, in turn, ensures that consumers are purchasing genuine and high-quality products.
The implementation of GST has made household appliances and daily consumer goods more affordable.
The implementation of GST has revolutionized the Indian tax system, bringing numerous benefits to the household appliances, phones, and daily consumer goods industries. GST has positively impacted consumers, businesses, and the overall economy, from streamlined tax structures to increased market competitiveness and transparency. As the GST framework continues to evolve, we can expect more significant advancements that will further enhance the affordability and accessibility of essential products for consumers across the nation.
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Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
