Why the GST is so important for the tax system in India?
India has launched its biggest tax reform from 1st of July, 2017 with an IVA that, according to the government, will bring a stronger and less corrupt economy. It is a big change that worries entrepreneurs.
GST means Goods and Service Tax (GST) that replaces over a dozen fees applies at the national level and in all 29 states. Its main objective is to transform this Asian country of 1.3 Billion inhabitants, with an economy of two trillion dollars, in one market.
Why the GST is so important for the tax system in India?
The finance minister, ArunJaitley believes that the start-up of the GST is a historic even for India since it was fragmented economically. The GST is a simple and single tax of India and considering India as one market.
But part of the Indian society also does not agree with this tax reform. Thousands of associations of merchants and SMEs went on strike at the time of approval by the parliament of India. The strike was called in 25 states of the country.
However, there are many advantages to GST. Let us find out them.
The GST (Goods and Service Tax) has been developed for the neutral and efficient tax system in India. Its advantages are:
- Larger tax base. It is necessary to reduce the rates of tax and eliminate classification disputes.
- Multitude elimination and its cascading effects.
- Fiscal structure rationalization and complicated procedures simplified.
- Compliance procedures harmonized that helps to increase efficiency and reduce errors.
- The GST replaces most of the taxes which are indirect.
Other advantages that the GST can bring to the merchants of India:
Possible price reduction: Due to a transparent and complete tax, manufacturers or traders do not have to include taxes as its cost of the production part that is a reasonable reason to say that it will be a reduction in the prices.
Revenue increases of Indian government: the Indian government wants GST introduction as a neutral rate of income, in which case the revenues may not be significantly increased in the short term.
It will be less cost in the whole procedure: Instead of keeping large records, returns and reports under different criteria, all taxpayers will feel more comfortable under this GST since compliances cost will be reduced.
Impacts of GST on the traders:
GST stands for Goods and Service Tax. This is a new tax structure that is applied to all the states of India. The main purpose to apply GST is to avoid all the complicated taxation at the different levels of manufacture and sale of order products.
Under GST, what public will receive?
Actually nothing, you will still go to the shop, pay the money and buy goods. Whatever changes will take place due to GST, it will be behind the screen. That means the entire process will remain the same until the goods are made in the market, only the tax that is given in the place will be changed.
How will the GST work?
Suppose, in one state the goods are made, whichever seller sells, and then sells to the retailer in the same state, and then from there comes in the middle of the public. This is all in the same state.
Now it is possible to sell the wholesale goods in another state.
In this case, it may be that the goods are sold in the first state only after the goods are built and then through it there came to the earlier state.
In the first case:
The goods made in Calicut of Kerala are being sold in Kochi. Then CGST and SGST will be applied. And it will go to the central and state government. Now, these things are sold from Mumbai to Nagpur. Then it will be applied CGST and SGST again. Now, once the shopkeepers raise the price in the sale again, tax changes accordingly.
In the second case:
The goods made in Mumbai of Maharashtra are being sold to a retailer in Kerala. So here IGST will be applied.But now these goods will be sold in Keralato the final consumer in Kerala. CGST and SGST will be charged on the said transaction.But there is a problem at this point. The shopkeeper selling from Mumbai will show that he has paid IGST. Then the SGST will claim credit for the Central Government’s IGST. But at the central government, this loss has happened. In this case, the state government will get SGST from the account ofthe Central government.
What is the need for GST Tax Reform?
A fine tax system takes the tax on every stage of making goods, supplies, and retail. This tax seems to be about the value of the goods on each stage.
There was a problem with VAT that he was different from every state. So the tax system was slightly improved, yet it was very complicated. Because to increase trade, the state tax-deducted. Like in Bihar after liquor prohibition, tax on alcohol was reduced in UP.
GST Audit Procedures:
GST Audit is an examination of each record that is maintained by a registered dealer. Its main purpose is to verify the correctness of all information declared, assess the compliance, and taxes paid with GST.
- If the turnover exceeds the Rs. 2 Crore, it is necessary to get the company’s accounts audited by a CMA or a CA firm.
- GSTR-9 is the annual return form for normal taxpayers, GSTR-9A is for composition taxpayers, while GSTR-9C is a reconciliation statement.
- The GSTR 9 is an annual return form for all the regular taxpayers registered under GST. It is mandatory to file GSTR 9 for all the taxpayer including the details of supplies made and received in a year separately.
- GSTR 9A is an annual return form for the composition scheme dealers having an annual turnover of less than Rs. 1 crore under the goods and services tax. The GSTR 9A form includes all the details regarding SGST, CGST and IGST paid during a given Financial Year
- GSTR 9C is for all the taxpayers having the turnover above 2 crores in a particular financial year. Along with the form, the taxpayer also has to fill up a reconciliation statement along with the certification of an audit.
In addition to the audit conducted by a chartered accountant. There are two other types of Audits:
This audit is conducted by the commissioner or on his orders, any officer appoints for the audit.
In special Audit, a department conducts a special audit. It is because of the complexity of the interest of revenue and the case. The CMA or a CA will be hired to conduct such an audit.
GST on Export or deemed export of Goods or services:
As per the provision contained under the law IGST, exports of services or goods, both are to be considered as “Zero-rated supplies”. They are allowed to claim the refund of GST paid.
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