Understanding GST And The Indian Taxation Structure

Understanding GST and the Indian Taxation structure

Revenue gained by taxes is a major source of income for the Indian government. This income by tax is used for the implementation of various projects for the nation’s development purpose. The various types of taxes are decided by State and Central government in connivance with the municipal and local corporation authorities. No government can pass any tax law without it being approved legally.

The role of the State and Central Government

The system clearly demarcates the individual role of each the State and the Central Government in the tax fixation process. Taxes like service tax, customs duty, central excise duty and income tax is fixed by the Central Government. Other taxes like value added tax (VAT), professional tax, agricultural tax, land revenue, state excise duty and stamp duty are taken up by the State Government. Besides these two government taxes the local bodies take care of property tax, service tax like water supply and drainage etc.

GST explained

Goods and Service Tax (GST) is a tax that covers all other indirect taxes like service and sales that are charged to customers. GST will make all taxes equal for customers throughout India.

While direct taxes are charged on corporate entities and individuals the indirect taxes automatically fall into the GST slab. Direct taxes include wealth tax, income tax and gift tax. The other taxes come under the jurisdiction of the indirect tax or better known today as GST.

What does GST mean for India?

Since GST replaces multiple taxes levied on services and sales it makes business easier and faster. Besides this:

1. The country enjoys a uniform tax method with no changes frequently

2. The GDP of the country can have a 2% rise

3. No more long truck queues at the borders of each state

4. Higher revenues are expected since the scope of evasion is less

5. Exports will be boosted because of lowered taxes

How does GST benefit businesses?

1. Since it is a single tax accounting is easy

2. There is no hidden facts because of the tax transparency

3. There is no fear now that any state will raise taxes at random

4. Automated tax system reduces hassles of working out tax

5. Providers of goods and services will enjoy benefits of easy taxation rates.

However, for the common man to understand it may take some time since it seems to be hitting hard on their pockets. This tax form has been welcomed by many with the exception of a few who feel that they are deprived of their little luxuries like watching a movie in the theatre or eating a meal with family in a restaurant.

However, on the whole the purpose of implementing GST by the government is for the welfare of the country and hence it will take some time for the people to understand the meaning and purpose of GST completely.