10 Reasons Why GST is Beneficial
1. GST is an inclusive Tax that will replace the current Indirect Tax regime. It is levied on both goods and services. GST has two components - the Central GST and State GST, thus empowering both the State and Central Government, to legislate and administer their respective Taxes.
2. GST will replace the following Central Taxes:
Central Excise Duty, Additional Duties of Excise and Customs, Special Additional Duty of Customs (SAD), Service Tax, Cesses & Surcharges on supply of goods or services.
3. GST will subsume the following State Taxes:
VAT, CST, Purchase Tax, Luxury Tax, Entry Tax, Entertainment Tax, Taxes on Advertisements, Lotteries, Gambling etc., State Cesses &Surcharges on supply of goods or services.
4. GST will bring economic integration in the country and a boost in the GDP growth, bringing down the fiscal deficit.
5. Unlike VAT and Service Tax, GST is essentially a Tax on value addition at each stage and it is levied at the point of sale and not purchase. This means that the customer bears the GST charged by only the last dealer in the supply chain, thus making it cheaper for the consumer and increasing the profitability of his business.
6. It will lead to a 10-17% fall in prices in the automobile sector, assuming an 18% GST rate.
7. Consumer durables will benefit from improved logistics. Direct benefits up to 200-300 bps in cost savings may accrue. A significant portion of direct benefits will be passed on to end consumers because of a highly competitive market.
8. Key petroleum products like crude, natural gas, high speed diesel and ATF have been kept out of GST. Compliance costs are likely to rise because of dual Indirect Tax mechanism. Overall Tax incidence on the cement sector could also decline. It will also benefit from expected decline in logistic costs.
9. GST will be positive for household and personal care space, as the effective tax rate reduces by 200-500 bps, apart from reducing warehousing and logistical requirements.
10.GST will thus consolidate and streamline the process of Indirect Taxation and make it easier and more effective. The taxpayers will pay one consolidated Tax instead of the plethora of taxes. Most of the developed countries use this form of taxation for ease and convenience and to avoid double Taxation.