Top 3 Reasons Why GST Is Beneficial For Businesses In India

In a country such as India, the bureaucracy is a big part of life for everyone. More so for businesses who have to deal directly with the bureaucracy. The indirect tax system prevailing before the implementation of the GST system was a tangled web of multiple layers of taxes and cesses.

Top 3 Reasons Why GST Is Beneficial For Businesses

There were Value Added Taxes, various Cesses, Octroi and various local taxes at the city level which businesses had to contend with. Different sectors had to contend with issues relating to them, for example, to analyze GST impact on real estate, we can take a look at the housing market pre and post GST introduction.

Before and After GST Impact on Indian Economy

The tax system was extremely convoluted and problematic in terms of its development. The implementation of the GST system was ad-hoc and it developed over a period of time in increments with new policies and legislation.

Since the indirect taxes were not under any single authority, it took a lot of time to make policy adjustments in response to economic and financial events in the broader economy. With the advent of the GST system, this has changed a lot. There were initial problems with the introduction of GST but that is being ironed out by the GST council.

One of the biggest advantages that GST has brought about to the broader economy, is that the formation of a single unified body handling indirect taxation in the country. This has allowed them to remain nimble and adjust policy with respect to economic and financial issues which the country faces from day-to-day.

Top 3 Reasons Why GST Is Beneficial For Businesses In India

Some of the main reasons that the Indian tax system requires GST are listed below:

1. Policy Implications

As mentioned above briefly, the policy issues which plagued a non-centralized system was one of the biggest drawbacks to the pre-GST tax system.

Various governing bodies were making rules without much consultation with the wider economy or taking into account current economic events. This led to a lot of problems with policy paralysis and lack of foresight.

Under the GST system, we now have a single governing body, the GST council, which looks after the entire GST tax system, thereby reducing friction between different bodies and centralizing the command center which allows them to respond to economic issues much more quickly than before.

For example, the Indian Real Estate industry goes through ups and downs with business cycles and the governing council of the GST system can tweak its policy after studying the GST impact on real estate.

2. Business Transparency

Another important advantage of the GST system is the amount of transparency it provides with respect to the Indirect Tax System. The previous regime of taxation was characterized by corruption and tax evasion.

There was widespread under-invoicing as well as under-reporting of business activity. Since the tax system under the older regime was a paper-based system, there was almost no way to make sure that businesses were reporting their business activities accurately and in a timely manner.

Many businesses that did transactions in cash under-reported their income which led to a loss of revenue for the country. Under the GST system, the way it has been designed, there is less scope for tax evasion due to under-invoicing. The different complementary forms which the GST system incorporates help maintain transparency since both the suppliers and dealers need to provide matching forms and invoices so that the system can cross-check what has been stated.

3. Ease Of Doing Business

This aspect of the importance of GST ties in with the last two points of business transparency as well as policy. With India wanting to increase foreign investment in the local economy, Ease of Doing Business has become a very important thing to consider.

Foreign companies, big corporations, startups, and small businesses, all want stable policy as well as transparency in the matters of taxation. The GST system provides stability and transparency which has allowed India to rise up the Ease of Doing Business rankings which have led to more foreign investment into India.

Since the whole system is managed under the GSTN (Goods and Services Network), and completely online, all of the information required by the companies are present on their personal dashboard on the GSTN, businesses are now able to see all of their information in one place.

Conclusion

The GST has no doubt had its share of hiccups when it was introduced, especially since this was one of the biggest Indirect Tax Reforms that the country has ever seen. Since the GST has subsumed a lot of taxes and cesses, it has touched a lot of sectors and the GST Council is checking its effects to try and fine-tune the system.

One of the most important sectors in India is the Real Estate sector and the GST impact on real estate is being watched closely to see what changes can be made in the future.

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TechGlobeX: Top 3 Reasons Why GST Is Beneficial For Businesses In India
Top 3 Reasons Why GST Is Beneficial For Businesses In India
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