How Will GST Affect You as A Business Person?

If the Goods and Services Tax becomes an act next year, it will transform the tax structure and have a big impact on the manufacturing and service industries in the country. Here’s how it will affect you if you are a business person.
a. A uniform rate and structure will transform India into a single, uniform market. If you are a manufacturer, you can set up your factory in a location that provides your business with a geographical advantage — proximity to supply chain, close to the consumer, etc — instead of thinking about tax friendliness as you do now.

b. The removal of a multitude of taxes and the cascading of the tax burden throughout the value chain will reduce taxes and costs at every point — wholesaler, retailer and consumer. As a result, products will become cheaper, and you will be able to sell more, and increase your revenue.

c. The simplification of the tax structure will significantly lower operating costs. Currently, you have to collect and pay a slew of taxes, and file returns for each of the taxes you pay. You need sets of accountants to work on your tax accounts and audits or risk non-compliance and penalties. GST, as a single tax, will simplify your accounting, reducing the need for large teams of accountants. What’s more, the entire GST process — registrations, returns and payments — will be completely online. Efiling will increase your compliance and lower the cost of penalties and interest pay outs.

d. Some expect GST to narrow the price difference between products from the organized sector and the unorganized sector. If you are a manufacturer of branded products, GST will make your items more competitive, and increase your business.

e. You will also be able to compete better against imported products since GST makes your products cheaper. For the same reason, you will be able to make a greater impact in exports.

f. By replacing the many inter-state taxes such as central sales tax, octroi and entry tax, etc., GST will make cross-border trade smoother. It will also make logistics of the supply chain more efficient. Manufacturers like you can set up your warehouse at the most geographically advantageous location instead of locating it for tax advantage. A more efficient supply chain will translate into lower operating costs and also faster entry into different regions of the country, resulting in more business for you.

g. If you are service provider, a GST of 18% may be higher than the current service tax regime of 15%. But you will be able to get credits for the tax you pay on building your infrastructure to set off against the GST on the services you provide.

h. If you are a software developer, you will no longer have to pay double taxes. Currently, in many cases software, software is taxed both as a good and a service.

i. Lower prices as a result of lower taxes will mean greater demand, which will increase revenues and profits of wholesalers and retailers.

Author Bio:

Taxation and tax planning had always been a topic of interest for Veena Kumari. As a student who is specializing in the finance industry, she has spent considerable time researching about such subjects and other similar ones. During her spare time, she indulged in writing for online portals, about her interest. Through her work, she has provided information about Goods and Services Tax and how it can affect you as a business person.