Goods and Services Tax (India)

GST: If you are a manufacturer you have to pay taxes on goods to both the centre and state for example, 

• Excise duty to the Centre, Value Added Tax to the state. If you are selling outside the state, you will have to pay octroi and sales tax to the state and central sales tax to the Centre.
• You will have to file returns for all transactions you make and the taxes you pay or are due to pay
• All participants in the value chain — manufacturer, wholesaler and retailer – are taxed. And each one will have to have a department to collect and pay tax, and file returns to several departments in the Centre and the states.
• The states and the Centre have to operate several departments to collect the taxes, each of them with different rules and regulations.

GST simplifies all of this. Under GST, you only make two payments if you are selling in the state, one to the Centre – CGST – and one to the state – SGST. If you are selling outside the state, you have to pay Interstate GST to the Centre. Transparency in tax structure will ease processes of tax compliance for companies.

This uniform tax structure will simplify the system, reduce operating costs for businesses and increase tax compliance. It also aims to get rid off unecessary formalities and paperwork.  GST will also make it more attractive for foreign investors looking to set up businesses in India.

      The current situation is that both state and central government have taxes and both have the right to accept and reject input tax credits. Sometimes a product from one state is refused tax credit if sold in another state. In some cases, the state refuses tax credit to the taxes paid to the centre. Under GST, the states will credit SGST and the central CGST.

India will become a single market with seamless movement of goods and services across the country. The absence of a multitude of state and central indirect taxes will have a significant impact on interstate trade. With a reduction in operating costs for companies, and the cascading effect of taxes, the costs benefits are expected to travel to the end consumers, reducing prices and increasing consumption, thereby contributing towards economic growth.