Benefits of GST (Goods and Service Tax)

By Registrationwala

2nd April 2017


Good and Service tax is an indirect taxation system. GST replaces all other forms of indirect tax of Central and State Government. These forms of taxes are Sales Tax/VAT, Entertainment tax, Luxury tax etc.GST is one biggest taxation reforms in India. GST allows registered businesses to claim a tax credit to the value of GST they paid on the purchase of goods or services.

GST facilitates the market and it has easy administration. This is because administrative duties come under a single system. GST is mainly introduced set to bring greater transparency to India’s taxation system.

Scenario of Indirect Taxation System in India

There are two different forms of taxation as direct and indirect taxation. Multiple taxation systems most of the times have become the worst system.

India will adopt a Dual GST model this means that the GST would be administered both by the Central and the State Governments.

There are 3 types system in Dual Model GST

  • SGST - State Good and Service Tax
  • CGST - Central Good and Services Tax
  • IGST - Integrated Goods and Services Tax

Benefits GST in India

  • Reduction in prices: There has been full and seamless credit, manufacturers or traders do not have to include taxes as a part of their cost of production. This is the reason for the reduction in prices.
  • Increase in Government Revenues: Many people resorted to paying taxes rather than evading. This was at the time of introduction of VAT, the public revenues actually went up instead of falling. Revenue Neutral Rate can be the principle of GST introduction in India.
  • Less compliance and procedural cost: All assesses will find comfortable under GST as the compliance cost will be reduced. These are instead of maintaining big records, returns and reporting under various different statutes. CGST, SGST, IGST system should be tracked separately.
  • Move towards a Unified GST: Most probably GST is always preferred in a unified form this means that one single GST for the whole nation which can be instead of the dual GST format. However, India is adopting Dual GST looking into the federal structure, it is still a good move towards a Unified GST indirect taxation system.

Read More on Unique Features of Indian GST

Important points to remember in GST

  1. All the states should implement the GST together and that too at the same rates. Otherwise, Provisions of Business law will become cumbersome. When the system will be same in the whole country then GST will be very advantageous because in that case, taxes will not be a factor in investment location decisions. Through this application, people will be able to focus on profitability.
  2. The taxable event should be clearly mentioned. CENVAT credit rules, the Point of Taxation Rules are amended/ introduced for this purpose only.
  3. GST is a Destination based taxation system, not the origin one. It should be clearly identifiable as to where the goods are going. It shall be difficult in the case of services.


Benefits of GST (Goods and Service Tax)