The new Goods and Service Tax (GST) is set to change the lives of the general people. Here we have some of the aspects that will change with the new tax system.
The shift in the Taxes
The GST rates aim to stay close to the older tax burdens. This will keep the transition revenue-neutral as the new tax will cause a shift in the individual item’s costing. GST will cause a slight rise in the costing of services such as telecom.
The new GST regime will make the taxing more transparent. With this law, the consumers will now be able to know the actual amount that they pay for the taxes. They will also know how that amount is split between the state and central government. This became possible as the new GST invoice clearly states all the details.
SME’s will have an increased tax burden
Small and Medium businesses may face an increased tax burden. These companies, before GST, were enjoying an exemption from the taxes. Companies that had sales up to Rs. 1.5 crore came under this category. The GST now makes them pay both state and central government taxes. This way, the new tax creates a huge base for the taxpayers also reducing the overall tax rates.
Unorganized sector set to change
The GST exempts businesses that have an annual turnover of fewer than 20 lakhs. Such an exception also puts the business structure to a threat. This is because big business houses can now turn away from this unorganized sector of the market. To keep its customers secure, the small business now has to voluntarily sign up for GST.
The changed supply chain
As the state and central government taxes change, the businesses will now have a changed vision at the location of their warehouses. This is a critical aspect as goods travel between states to reach customers located at different locations. The business thus will make efforts to optimize its supply chain.
Vanished Tax Breaks
The new taxing system has completely eradicated the excise duty exemption by setting up the production units in the hilly states and in the northeast. This will drive the business houses to make investment decisions based on economics that are sound.
Training the Workforce
Not only the business finance will go under a change, under the new GST regime, the business houses also need to train their workforce to align with the changes. The business also needs to change its business and accounting software and aware of the vendors and other relevant people with the changed pricing structure.
Being on the Right side of Law
The companies and business houses have to take care of their pricing with the customers as they make a shift from non-GST to a GST paying phase. Also, there is an ant-profiteering body to keep a check on hoe business work out on their tax structure and the prices charged with the customers.
Liquor and fuel
Hydrocarbons such as Petrol, Crude oil, Jet fuel, Diesel and Natural gas may charge a slightly increased tax with GST. Also, liquor will also see a rise in prices in the new taxing system. Also, the new tax involves increased costs paid in the production and service of these items.
Under the renewed tax regime, the suppliers have to upload all the details regarding their transactions and invoices. Also, the system automatically generates the tax returns for the buyers for goods and services based on the data of suppliers.
The Bottom Line
Combing 17 federal and state taxes into a single tax, the GST is set to change the finance sector. Apart from the friction, it will generate, the new system will also stabilize the country’s economy in the near future.