It’s a year since that great day when GST was launched across India. Prime Minister Narendra Modi and then President Pranab Mukherjee pressed a button in the Parliament Central Hall on June 30th 2017 at midnight to launch the Goods and Services Tax popularly called GST.
Prime Minister Narendra Modi described GST as a Good and Simple Tax. GST was hailed as the biggest tax reform ever since Independence. It is a single indirect tax for the whole of India. GST reduces the cascading effect of taxes or a tax on tax.
GST is a comprehensive indirect tax charged on the manufacture, sale and consumption of goods and services across India. GST has replaced Central Excise Duty, Service Tax, Special Additional Duty of Customs, Additional Duties of Excise and Customs, VAT, Central Sales Tax, Purchase Tax, Entry Tax, Entertainment Tax, Taxes on Advertisements, lotteries, betting and gambling and State Cesses and Surcharges. GST replaced at least 17 indirect taxes.
One year on let’s take a look at the successes and failures of GST and what’s next. Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
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Under GST, goods and services are categorized into 5 Major Slabs. They are 0%, 5%, 12%, 18% and 28%. All essential items fell in the 0% GST slab. Telecom services, IT services and financial services fell in the 18% GST slab.
1. What were the problems small businesses faced after GST?
Let’s take a look at what happened to small businesses after GST. Informal businesses and the MSME industries were in some difficulty after demonetization. This difficulty increased after demonetization.
There were bound to be some problems in the initial months of the launch of GST. Small businesses had to get used to GST and tax compliance.
MSME (Micro Small and Medium Enterprises) are the backbone of the Indian economy. They provide employment to more than 12 Crore people and contribute to 45% of the overall exports of the country. MSME contributes to nearly 31% of India’s GDP.
For years small businesses had escaped the tax net. After GST they could no longer do so. GST enhanced the tax base bringing many small and medium enterprises under the tax net. There was bound to be some pain. Small and medium enterprises had to be tax complaint.
2. How were these problems solved?
SEE ALSO: GST Tax Rates In India
3. Benefits of GST after a year
4. What are the gains of GST?
A single market for a single Nation: Because of GST you no longer see long queues of trucks at State Borders. GST has created a seamless National Market reducing delays at State Borders and cutting transaction costs for the logistics industry. Businesses can easily manage production, supply, and storage.
A wide tax base: Tax evasion is very difficult with data analytics, invoice matching and the benefits of input tax credit serve as a motivator. More businesses are on GST with registrations crossing a Crore.
India’s GDP slowed to 5.7% for the April-June quarter of FY 2017. This was because of the lingering effects of demonetization. Now, post GST India has retained the fastest growing economy tag.
5. Some problems persist with GST which must be looked into:
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