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Sneak Peek into the World of GST

We all have heard about it, we all have seen it on our bills/invoice copies. Some of us may have even gone into long hours of discussions/arguments with colleagues/friends/relatives over tea & coffee breaks about it. It is not just panels of experts, economists, politicians and business men who mulled over it, but the whole of year 2017 saw the trade & business undergo a paradigm shift in India, with its introduction.
Yes, Ladies & Gentleman – we are talking about the over debated, the big brother of taxes – GST. Or for some of those who may still not know what it stands for. Goods & Services Tax! Its pros, its cons – Financial & Accounting Experts have talked enough & more about it in media – both digital & print. On that note, Let us take a quick sneak – peek into the wondrous world of GST.

GST is an Indirect Tax which has replaced many Indirect Taxes levied on goods & services by the Indian central & state governments. Passed in the Parliament on 29th March 2017, the Act came into effect on 1st July 2017. As a tax reform, it has aimed to remove taxation barriers between states and create a single market which is open to all to buy, sell, import and export within the country. Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.Phew! Big Words.

GST is an Indirect Tax which has replaced many Indirect Taxes levied on goods & services by the Indian central & state governments. Passed in the Parliament on 29th March 2017, the Act came into effect on 1st July 2017. As a tax reform, it has aimed to remove taxation barriers between states and create a single market which is open to all to buy, sell, import and export within the country. Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

Let us look at it from a simpler lens! Basically, GST is one indirect tax for the entire country. A product has to go through different stages before it reaches the end consumer, and there are several taxes used to be applicable throughout this process. The earlier tax on tax regime used to levy an accelerating indirect tax at every stage a manufactured product used to go through; making the ultimate cost to consumer relatively higher. However, this situation changed after the GST regime.  Let’s understand here-

Erstwhile Indirect Tax System-

Raw Materials Supplier Sells At  Rs. 100/-

Manufacturer Sells At  Rs. 154 {Rs.40 Value Addition + 10% tax on 140}

Wholesaler Sells At  Rs. 202.4 {Rs.30 Value Addition + 10% tax on 184}

Retailer Sells To Consumer At  Rs. 232.4 {Rs.10 Value Addition + 10% Tax on Rs. 222.4}

Current GST System- Raw Materials Supplier Sells At  Rs. 100 (Inclusive of GST at 10% of Rs. 100)

Manufacturer Sells At  Rs. 144 (Rs 40 Value Addition + Actual Tax Liability of Only Rs. 4 as Rs. 10 has already been paid by the raw materials supplier}

Wholesaler Sells At  Rs. 191.4 {Rs 30 Value Addition + Actual Tax Liability of Only Rs. 3.4 as Rs. 14 – has already been paid by raw material supplier (Rs.10) & manufacturer (Rs.4)}

Retailer Sells To Consumer At  Rs. 201.8 {Rs.10 Value Addition + Actual Tax Liability of Only Rs.2.78 as Rs. 17.4 as already been paid by raw material supplier (Rs. 10) & manufacturer (Rs. 4) & wholesaler (Rs. 3.4)}

So, a product that cost Rs. 232.4 in the erstwhile indirect taxes regime now costs only Rs. 201.8 under Big Brother’s i.e. GST’s regime. Voila!! Could that explain why the consumer purchasing trends are on the rise? Maybe, may not be. But we know one thing for sure – GST Registration Online has reformed Indian business in more ways than one. Well what are the other ways of transformation? That’s for later, Folks!

Until then Keep Reading & Keep Trending!

 

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