One of the Biggest Reforms in the Indian Economy: GST By Dhivya Krishna - January 2, 2020 Last Updated at: Jan 13, 2021 0 1166 The Union Minister for MSMEs, has announced that MSMEs with GST registration would no longer need the Udyog Aadhar Registration for availing the Interest Subvention Scheme. The Scheme aims to provide incentives to MSMEs for registering under the GST regime. Introduction All that you’ve ever read in books about reforms in the economy and the generalization of taxes, following the notion of “one tax, one nation” and all such things have been brought to action under the name of GST (Goods and Services Tax). While GST might have come as a shock to all the corrupt taxpayers, but it indeed is one of the most sorted and well-planned reforms for the economy introduced ever since the independence of the country. Brought into implication from 1st July 2017, the committee for this was set-up by Prime Minister Atal Bihari Vajpayee back in 2000. What is GST? As a seller or service provider, it is mandatory to register for the GST if your business has a turnover of above Rs.40 lakhs (if you sell physical goods) or more than Rs.20 lakhs if you supply services. What exactly happens under Goods and Services Tax? One of the significant benefits of GST is the removal of the cascading system that is replaced by the one indirect tax called Goods and Services Tax. Along with the consumers, the traders will benefit equally from this along with the provision of economic freedom for their business. Discover the GST rate, HSN code, or SAC code for all goods and services by using our GST rate finder service. This finder service is also known as the HSN code finder. For products and services, GST is calculated on the basis of an item’s HSN or SAC code. The two major things that happen under GST include: Firstly, the tax will be collected at the final step, i.e., when the consumers buy them, removal all the in-between and indirect taxes that were levied earlier during the process. The final GST will be inclusive of taxes implied by both the state and central governments. Secondly, tax barriers applicable to trading across various states will be removed under GST, allowing freedom of trade and movement for business. Make Your Business GST Ready Working process of Goods and Services Tax While the working of GST might seem complicated, it is quite easy to understand the process. Let us see it with the help of an example. Manufacturing process: Consider the manufacturing of any products say a toy, on which a GST of 10% is applicable. Let the total cost of raw material, including the GST taxes (i.e., Rs.40) to be Rs. 400. The manufacturer increases the rate by 10% as his profit. So, the total amount before providing it to the wholesale marketer is Rs.440. In this case, the manufacturer will have to pay Rs.44 as tax. But, after GST, the total amount that the manufacturer has to pay as tax is Rs.4 (44-40), as the earlier tax has already been paid. Wholesale process: The manufacturer then sells the toy to the wholesale marketer at a rate of Rs. 440, which again includes all the taxes (10% of Rs. 440). The wholesale marketer then adds his profit amount of Rs. 40 to the total value, making it a total of Rs. 480. Next, the wholesale marketer will again be exempted from the tax that has already been included in the total amount. Thus, they will have to pay the final GST amount of Rs. 4 (48-44). Retailer: The final procedure is carried out by the retailer. The wholesale marketer sells the toy to the retailer at a rate of 480, being inclusive of all taxes (10% of 480). The retailer also adds his profit margin of Rs. 40, making it a gross amount of Rs. 520. The GST so applicable is 10% of 520, i.e., Rs.52. But, since the retailer has already paid the taxes, they will have to pay just Rs.4 as the tax (52-48). At the final step, the customer who buys the product will have to pay a tax of Rs.52 (10% of 520). In the other case or the cascading tax system, this amount would have been more than expected, making the customers pay the total tax inclusive of all levels. As such, this method of the GST system is beneficial for both the sellers and buyers alike, offering equal levels of profit and reducing the complexity of buying and selling goods. In the present scenario of GST, the consumers have to pay the central and state taxes altogether, unlike the chaotic process of paying massive taxes at various levels and for multiple purposes. Conclusion If carried out in the right and transparent formats set-up by the government, GST is sure to provide a significant boost to the Indian economy shortly, making it stand among the competitive levels on the global platform. Also, while the process of GST implication might seem complicated, it is an escape from the messed up system. Frequently Asked Questions (FAQ) 1. How is GST beneficial for small traders? The traders having a turnover under ten lacs are exempted from paying GST. 2. What are the benefits of the exporters? All the exporters are exempted from GST, allowing them to grow their business and trades, which are also beneficial for the economy of the nation. 3. What is GSTIN and its role? GSTIN stands for Goods and Services Tax Identification Number. This number is provided to all the individuals registered under GST and is mandatory for the businessmen to place the GST registration certificate at their business centre.