The newly introduced GST law benefits Govt., businesses and customers in many ways.
First of all, GST will reduce the number of tax exempt goods being sold or “supplied” as per the terminology used in the new law. Under the old tax laws, this was a major cause of revenue loss for the government. GST will thus indirectly help the govt. in generating more revenues.
Another positive impact of GST is providing input tax credit to suppliers across the board. This will encourage all suppliers to become tax compliant. In effect, this will increase number of taxpayers and again generate more revenue for the government.
The logistics and Inventory costs of businesses across industry is likely to fall under GST. This is mainly because of the complete removal of checks at State borders across the nation.
Long queues of trucks, stagnant for hours and hours together used to be the order of the day in the old tax regime. These check points were also a place of rampant corruption.
GST will now make movement of goods through State borders faster without hindrances.
Studies in this field have established that in India, on an average – trucks travel 280 km a day compared to about 800 km a day in United States. Losses are not only caused by way of a higher cost for transportation, but it also happens when goods do not reach on time to its destination.
GST effectively addresses these issues and makes a huge improvement by scrapping the check nakas. GST enhances the efficiency of logistics and inventory costs of business all over the country. GST brings direct benefits to businesses in this area of expenditure.
GST also brings a big investment boost – especially in the capital goods sector. This will be on account of the transparent and smooth taxation process under the GST laws.
In the previous tax structure, input tax credit was not available for many capital goods. With the implementation of GST, full input tax credit will be available to them. This means a clear 12-14% drop in their overall costs. This will definitely bring substantial growth in capital goods investment around the country.
Manufacturing industry will also benefit on account of removing problems like cascading effect of taxes, inter-state taxes, high logistics costs and fragmented market conditions prevailing in the market. Removing these ills are are big positives for the manufacturing industry and this will bring a big boost for growth in the industry.
The indirect tax revenues of the Central and State governments will improve under GST. This will happen primarily due to widening of tax base, increase in volumes of trade and more particularly through improved tax compliance.
Above all benefits, an important positive factor of GST is that it will be an easier tax law to administer. This will eventually happen once its initial implementation process gets over. GST will have lesser hassles for both its administrators and taxpayers once the glitches are sorted out. This will happen after the system starts running smoothly after some time.