Exactly four years before, dated 4th July 2017, India witnessed the most significant tax reform segment ever. After many years of brainstorming, and discussions, India at last bit the bullet and closed in more than two dozen indirect taxes into the Goods and Service taxes, that is, GST. However, at first, it was a very daunting moment for people rather than for the whole country as it was beset with a substantial number of legacy taxes which turned the running of the business into a bad dream.
GST simplified the process of taxes
Even though there were some problems gradually decaying over the past few years, the GST regime brought the business running back to live. And not only that, but GST also strengthened the notion of Federalism and lifted in front of the face of the GST Council, making all the decisions through consensus.
How GST has the solution
The GST not only simplified the path of running the business in India, but it also helped the enterprises to take a quicker pace to take off. Earlier, each state used to levy the rate of taxes of differently. As a result, there was a great deal of inefficiency and a high cost of compliance. But now, the scenario has changed drastically. The GST has reinstated the complex indirect tax structure into a transparent, technology-driven, and simple tax regime, thereby consolidating India into a common market.
Previously, if a company wished to do business, it had to make as many as 467 submissions to different government authorities in every state. But because of GST, the number has been reduced and restored to just a dozen.
IGST on Imported Goods
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In India, imports are generally known as inner state supply, and importers need to pay IGST on import of goods. Usually, IGST is charged at the applicable rate that is categorized for the respected goods. However, one must pay IGST in the meantime of paying primary custom duty in addition to the Social Welfare Surcharge at the ice gate portal. On the other hand, GST Compensation Cess, which is levied by the Goods and Services Tax Act 2017, will also be paid simultaneously; it’s applicable on the goods.
Importers need to pay IGST on the import of goods, and while filing GST returns for that particular month, they can avert the input of IGST paid.
Other impact of GST
GST is not only helping the businesses to run smoothly; the monthly collections under GST have reached to one trillion rupees regularly for the past few months, depicting that the tax regime has matured. And soon, the time will come when it will act as a catalyst for speeding up the Indian economy. In fact, the GST mop-up also broke the record highest 1.41 trillion rupees in April, even amidst the surge of covid-19 waves.
With time, people have experienced a drastic reduction in the tax rates, a rapid increase in the tax base, and a simplification of the procedures. If you can believe it, in the last four years, the GST tax base got doubled from 66.25 lakh to 1.28 crore, as per the words of Finance Minister Nirmala Sitharaman.
How GST is not only about business
As mentioned before, GST is not just about the businesses. It also looks after the common person by reducing the rates of the indirect taxes so that they can pay them with ease, as Smt. Sitharaman said in an interview that the revenue-neutral rate was once 15.3 per cent, but with the GST rate now, it weighed only 11.6 percent.
The perfect Structure
The GST mainly comprises with four-rate structure. It imposes or spares a tax of just a five percent rate on essential items. While on other spectrums, it exempts or levies twelve percent, eighteen percent, and twenty-eight percent. Moreover, before the GST, the total of excise tax, value-added tax, and other taxes was a burden to bear for more than thirty-one percent of any consumer. Therefore, the government is now thinking and looking forward to possibly simplifying the GST rate structure.
The effort of the government
Even in the case of small businesses, the government is making efforts to make GST compliance easier and better. Now, the businesses that make an annual turnover of up to forty lakhs will be exempted from the GST, but this is solely for Goods. Similarly, to the companies and services which make an annual turnover of twenty lakh will also be exempted from paying the tax. But those with a turnover of 1.5 percent for goods can choose from the composition scheme and need to pay only one percent tax.
On the other hand, a similar advantage has been given to those who have been making turnovers for up to rupees fifty lakh a year. Those people can also opt for the composition scheme for their services and pay only six percent of the tax rate.
During the fourth anniversary of the GST Smt. Sitharaman made it clear that any kind of reform on the tax scale in any large and diverse country like India can be highly excruciating and challenging. She said that the GST council showed its capability and wisdom in legitimizing the concern of the taxpayers and citizens by any correction whenever possible. Moreover, this has created not only for the easement or betterment of the taxpayers or MSMEs, but it also looks after the reduction of the tax burden on the commoner.