Objectives Of GST
To achieve the ideology of ‘One Nation, One Tax’
GST has replaced multiple indirect taxes, which were existing under the
previous tax regime. The advantage of having one single tax means every state
follows the same rate for a particular product or service. Tax administration is
easier with the Central Government deciding the rates and policies. Common
laws can be introduced, such as e-way bills for goods transport and e-invoicing
for transaction reporting. Tax compliance is also better as taxpayers are not
bogged down with multiple return forms and deadlines. Overall, it’s a unified
system of indirect tax compliance.
To subsume a majority of the indirect taxes in India
India had several erstwhile indirect taxes such as service tax, Value Added Tax
(VAT), Central Excise, etc., which used to be levied at multiple supply chain
stages. Some taxes were governed by the states and some by the Centre. There
was no unified and centralised tax on both goods and services. Hence, GST was
introduced. Under GST, all the major indirect taxes were subsumed into one. It
has greatly reduced the compliance burden on taxpayers and eased tax
administration for the government.
To eliminate the cascading effect of taxes
One of the primary objectives of GST was to remove the cascading effect of
taxes. Previously, due to different indirect tax laws, taxpayers could not set off
the tax credits of one tax against the other. For example, the excise duties paid
during manufacture could not be set off against the VAT payable during the
sale. This led to a cascading effect of taxes. Under GST, the tax levy is only on
the net value added at each stage of the supply chain. This has helped
eliminate the cascading effect of taxes and contributed to the seamless flow of
input tax credits across both goods and services.
To curb tax evasion
GST laws in India are far more stringent compared to any of the erstwhile
indirect tax laws. Under GST, taxpayers can claim an input tax credit only on
invoices uploaded by their respective suppliers. This way, the chances of
claiming input tax credits on fake invoices are minimal. The introduction of e-
invoicing has further reinforced this objective. Also, due to GST being a
nationwide tax and having a centralised surveillance system, the clampdown on
defaulters is quicker and far more efficient. Hence, GST has curbed tax evasion
and minimised tax fraud from taking place to a large extent.
To increase the taxpayer base
GST has helped in widening the tax base in India. Previously, each of the tax
laws had a different threshold limit for registration based on turnover. As GST is
a consolidated tax levied on both goods and services both, it has increased tax-
registered businesses. Besides, the stricter laws surrounding input tax credits
have helped bring certain unorganised sectors under the tax net. For example,
the construction industry in India.
Online procedures for ease of doing business
Previously, taxpayers faced a lot of hardships dealing with different tax
authorities under each tax law. Besides, while return filing was online, most of
the assessment and refund procedures took place offline. Now, GST procedures
are carried out almost entirely online. Everything is done with a click of a
button, from registration to return filing to refunds to e-way bill generation. It
has contributed to the overall ease of doing business in India and simplified
taxpayer compliance to a massive extent. The government also plans to
introduce a centralised portal soon for all indirect tax compliance such as e-
invoicing, e-way bills and GST return filing.
An improved logistics and distribution system
A single indirect tax system reduces the need for multiple documentation for
the supply of goods. GST minimises transportation cycle times, improves supply
chain and turnaround time, and leads to warehouse consolidation, among
other benefits. With the e-way bill system under GST, the removal of interstate
checkpoints is most beneficial to the sector in improving transit and destination
efficiency. Ultimately, it helps in cutting down the high logistics and
warehousing costs.
To promote competitive pricing and increase consumption
Introducing GST has also led to an increase in consumption and indirect tax
revenues. Due to the cascading effect of taxes under the previous regime, the
prices of goods in India were higher than in global markets. Even between
states, the lower VAT rates in certain states led to an imbalance of purchases in
these states. Having uniform GST rates have contributed to overall competitive
pricing across India and on the global front. This has hence increased
consumption and led to higher revenues, which has been another important
objective achieved.
CONTENTS
Types of GST
GST Tax Slabs
GST Council
GSTN (Goods and Services Tax Network)
GST Returns
Input Tax Credit (ITC)
Reverse Charge Mechanism (RCM)
GST Exemptions
E-Way Bill
Composition Scheme
