9 Advantages of GST & Taxes It Replaced

The Goods and Services Tax (GST) is a major reform of the Indian indirect tax system. It has replaced a multitude of indirect taxes levied by the state and central governments. GST has several advantages, starting from simplifying the tax system, reducing its cascading effect on taxes, and making compliance easier for businesses. Read on to learn about GST, its benefits, and more! But first, let's discuss about CGST and SGST. 

What is CGST?

The full form of CGST is Central Goods and Services Tax. The Central Government of India imposes a tax on the supply of goods and services within a state. All revenue collected through CGST goes to the Central Government's treasury. This CGST Act of 2017 governs the imposition and collection of tax, and it is subject to amendments from time to time.

What is SGST?

SGST stands for State Goods and Services Tax, which is a tax the government levies on the intrastate supplies of both goods and services. The respective state government where that particular product is consumed collects the tax. 

For example, Telangana has its own GST Act. Following the introduction of SGST, all state taxes, such as luxury tax, entertainment tax, entry tax, value-added tax, etc., were unified under its umbrella.

9 Advantages of GST

The implementation of GST has brought about numerous advantages for the Indian economy, businesses, and consumers. Here are nine key benefits of GST registration:

1. Easy Compliance: GST has streamlined the tax compliance process by replacing multiple taxes with a single one. This has reduced the burden on businesses, especially small and medium enterprises (SMEs), who no longer need to deal with complex tax laws and procedures.

2. Uniformity of Tax Rates and Structures: GST has brought uniformity in tax rates and structures across India, eliminating the cascading effect of taxes that existed earlier. This has created a level playing field for businesses and reduced the scope for tax evasion.

3. Removal of Cascading: One of the primary objectives of the GST is to eliminate the cascading effect of tax that was previously observed. This 'Tax on Tax' effect occurs when you have to pay tax on the value of a good or service that already includes tax. This can increase the overall tax burden on the end consumer.

4. Improved Competitiveness: Enhancing transparency and reducing expenses can boost the competitiveness of businesses in both domestic and international markets. By being transparent with their practices and costs, companies can gain the trust of their customers and stakeholders, which can lead to increased sales and profits.

5. Simple and Easy to Administer: The GST regime is simpler and easier to administer compared to the previous tax system. This has reduced administrative costs for both the government and businesses.

6. Higher Revenue Efficiency: The streamlined GST system has improved tax collection efficiency, leading to higher revenue for both the central and state governments. This additional revenue can be used for infrastructure development and social welfare programs.

7. Single and Transparent Tax Proportionate to the Value of Goods and Services: GST is a single tax levied on the final value of goods and services. This makes the tax system more transparent and fair, as the tax burden is directly proportional to the value of the transaction.

8. Relief in the Overall Tax Burden: The trade and industry sectors are experiencing a reduced average tax burden, leading to lower prices, increased consumer spending, and subsequently, a notable surge in production, thus bolstering industrial growth. Additionally, businesses can avail themselves of GST credits on inputs, effectively lowering the ultimate cost for consumers and fostering enhanced efficiency in cost management.

9. Reduced Corruption and Tax Evasion: The enhanced efficiency of the streamlined system promotes transparency and minimises tax evasion, thereby fostering a conducive environment for economic growth. GST has demonstrated its advantages for both businesses and consumers, contributing significantly to the overall economic boost.

Also Read - What is GST? Meaning & Types of GST Returns

Taxes GST Replaced

The implementation of the Goods and Services Tax (GST) has led to the replacement of various taxes that were previously imposed. At the central level, GST has replaced taxes such as additional duties of customs, service tax, central sales tax, central excise duty, excise duty on textiles and textile products, and additional duties of excise.

Similarly, at the state level, GST has replaced taxes, including value-added tax (VAT), central sales tax, purchase tax, CESS, taxes on lottery, gambling, betting, and advertisements surcharge, and entry tax. This has simplified the tax structure and promoted a more unified and efficient taxation system.

Also Read - Online GST Registration and Guidelines

To Conclude

The introduction of GST has made a significant impact on the Indian economy by simplifying the tax system, reducing the tax burden, and improving tax compliance. The advantages of GST contribute to the expansion of businesses, consumers, and the government, and are expected to further play a key role in India's economic growth and development. 

Disclaimer

This blog provides informational content on tax benefits and rules based on the current provisions of the Income Tax Act of India, 1961. The interpretations are subject to change as per amendments made by the Government of India. Applicable rates of GST and cess will be as per the current regulations. Readers must seek professional advice for accurate and up-to-date information.
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