GST (Goods and Services Tax) is a tax scheme imposed by the Indian government. It is implemented on the supply of commodities or services in India. Incorporated by the Indian government in 2017, GST replaced the existing taxes imposed by central/state authorities on the supply of goods and services.
Based on the ‘One Country, One Tax Regime’ system, GST has proved beneficial for the Indian economy. The business landscape has also changed due to the introduction of GST. Businesses have to understand the basic principles of GST to avoid any legal hassles. Many business owners rely on GST service provider to make sure they are following GST norms.
According to reports, the performance and competitiveness in the manufacturing industry have increased after the introduction of GST. Before GST, manufacturers, and distributors had to pay numerous indirect taxes imposed by the state and central government. The administrative costs for businesses were high before GST. At present, businesses have to only pay GST on the supply of commodities/services. The compliance burden of manufacturers and distributors in India has decreased after the introduction of GST. The GST on manufactures or distributed goods in India can range from 5% to 28%.
Before GST, only a few service providers counted for most of the taxes collected by the government. For example, in 2014, there were more than 11 lakh service tax cases in India. However, only the top 50 accounted for more than half of the service tax collected in 2014 by the Indian government. Lesser tax collection from service providers hampered the Indian economy which, was stopped after the introduction of GST.
The major services that pay most of the GST are IT services, insurance services, banking and finance services, telecommunication services, and other types of business support services. Before the introduction of GST, service providers had to bear several types of indirect taxes imposed by the state and central government. Now, service providers are working in a unified manner due to GST. Not to forget, GST has lessened the compliance burdens on service providers.
GST has had impacts on various industry sectors in India. After frequent intervals, the government of India assesses the impact of GST on different industry sectors. It is done in the GST council meeting held after frequent intervals in India. The impact of GST on different sectors in India is as follows:
• Agriculture: Agriculture sector is the largest contributor to India’s annual GDP. It contributes more than 15% to the nation’s GDP. The biggest issue for the agriculture sector was heavy taxes on the transportation of products to different states. This issue is somewhat resolved due to the introduction of GST. However, there are still some issues about the transportation of agricultural products to different states.
• Automobile: GST has provided benefits to buyers, distributors, and manufacturers in the automobile industry. Before GST, the automobile industry had to go through several taxes like VAT, road tax, vehicle tax, sales tax, etc. After the introduction of GST, all the indirect taxes are compiled under one tax regime.
• Freelancing: There were unclear tax instructions for freelancers in India before the introduction of GST. After GST, freelancers can easily file their taxes online.
• E-commerce: The GST is influencing the growth of the E-commerce industry in many ways. GST bought a TCS (Tax Collection at Source) method for the e-commerce industry. TCS helps the seller to immediately collect taxes whenever a buyer shops something from an e-commerce site.
• Start-ups: Before GST, start-ups that had a PAN India presence were confused with different tax regimes of different states. After the introduction of GST, start-ups can worry less about the taxation regime and more about ensuring their business continuity.
How to ensure GST compliance for my business in 2021?
Hiring in-house GST experts can be costly for a business organization, especially for start-ups and small businesses. It is where GST service providers come into the picture for businesses in India. You can outsource your GST processes to a reliable CA firm to slash overhead costs. Ensure strict GST compliance for your business now!
