Taxation Laws are one of the vastest and most diverse laws in the country, and they keep coming with minor changes as regards the tax rates, exemptions, and deductions every year in the financial budget. However, 2017 was different for the taxation regime in the country. Although not in the financial budget for the fiscal year, the taxation regime came up with the most revolutionary and controversial law in the mid of the year, and this law is the Goods and Service Tax Act. The law came as a complete blow to the indirect tax regime in the country, repealing all the existing indirect tax laws, and with that, it was evident that the law has come for a major change. And even after two years of its introduction, there have been continual changes in the law which you can see from the latest GST notification. Having said all of this, here with this article, we aim to tell you all about what is GST Act and what has it done for the country and the economy.
What is the GST Act?
The GST Act is an indirect tax law that governs the provision and supply of goods and services by the suppliers and the service providers. Whenever a supplier or a service provider makes a supply of goods or a provision of services, it is required to pay a tax to the government at a certain percentage on the value of goods and services supplied or provided. This percentage is the rate of GST, which can be either 18% or 28%. All of this needs to be regulated, and that job is done by the GST Act with provisions enshrined for every single thing from registration, to return filing, to payment, as well as the penalties for non-compliances.
Earlier, these things were taken care of by four different laws, namely the Service Tax Act, the Central Sales Tax Act, the Value Added Tax Act, and the Excise Act. And even these Acts were governing things well. So, why was this drastic change made to the complete regime? Was the GST Act really needed? Well, here is why the Act was introduced.
Why the GST Act?
Although there were laws governing the indirect tax regime in the country, they were very diverse and required multiple compliances to be made. Also, due to many laws, there used to be incidences of double taxations. This is what happened.
In case a supplier has made an intrastate supply of goods, they had to pay Value Added Tax on it. And if subsequently an interstate supply of the same goods was made, then the Central Sales Tax became applicable to those goods. So, there were two taxes levied on the same goods. This created a cascading effect on the taxpayers, which means that the suppliers and service providers were unnecessarily burdened by higher taxes. Moreover, this led to an increase in the price of the goods and services, making things costly for the end consumers.
Another drawback was that is a person is a supplier of goods as well as a service provider; then he would come under the purview of the Service Tax Act, the Central Sales Tax Act, and the Value Added Tax Act. This made it imperative for the person to take up registration under all the three Act, which was increased compliance as well as an increased cost because, on every registration, a certain sum is leviable as a registration fee.
Looking at all these situations, the Government felt that there was really a need to curb these problems and ease out the things for the taxpayer. And it is for all of these reasons that the GST Act finally came into the picture as a single unitary law for all the diverse ones. Also, the need for this Act has been clearly evident from the fantastic benefits that the Act has brought with it.
Advantages of the GST Act
Elimination of Cascading Effect of Taxes
GST is a unitary law that has taken a complete indirect tax regime into its fold. Now there are no multiple taxes, so there is not even a chance of multiple levies. So, there can be no incidences of double taxation, and this has substantially helped eliminate the cascading effect of taxes on the taxpayers. Now the taxpayers have to pay just one single goods and service tax at a fixed GST rate to be applied to the value of goods and services.
Lesser Compliances
With everything coming under one single umbrella, even the need for complying with multiple laws have been eliminated. Now whatever the taxpayer be, supplier of goods, service provider, or both, it just needs to take one single registration under the GST Act. Moreover, it also needs to file just the GST returns and make only their GST payments. All this has essentially led to lesser compliances and made things more comfortable, more convenient, and effortless for the taxpayers.
Other Benefits
GST has not been called a revolutionary Act without strong reasons. The Act has come with major changes, and one of them is its step towards the promotion of the Digital India initiative with the introduction of a GST website and GST online portal. With this, it has become easier for people to follow the latest GST notifications, announcements, and news. They can also easily keep up with the compliances by getting registration, making payment, and filing returns online through the GST online portal. All these have majorly led to making things more comfortable and convenient for the taxpayers.
With all these benefits, of course, the implementation of the GST Act has come as a positive change. However, there are loopholes to everything, and even GST has not been free from them. Besides the benefits, we can see some disadvantages of the Act as well.
Disadvantages of the GST Act
There are not many disadvantages to the Act. However, there is one thing that comes as a major problem for the taxpayer. And that is the understanding of the vastness of the ct. The requirements of the Act are not as easily understandable. In fact, a person who is a layman would hardly understand anything about the Act. So, this has necessitated the need for the businesses to seek the help of GST professionals to keep up with the proper compliances under the Act because although the compliances have reduced, they have become stricter. Due to this, the operational costs for businesses has increased significantly. And this is what comes as a disadvantage of the Act.
Conclusion
This was a complete guide for you to give an idea of what is GST Act and how it has impacted the nation. There are, of course, loopholes, but the benefits of the Act have been far more than that. Moreover, the Act is continually evolving, and that is evident from the latest GST notification coming on the GST website at regular intervals. So, the need is to keep patience and be supportive, so that we can all get a good and simple law with the best benefits for governing the indirect tax regime in the country.