GST means Goods and Services Tax. It's a new tax system which will absorb all the current taxes levied on goods, manufacturing, services etc under One Single Tax at the same value throughout India.
When people talk about Tax Saving SIP, people usually talk about GST as well. It's a major and very important tax change for India seeing our growth and economic advancement in the coming future.
Goods and Services Tax. Tax Saving SIP is also a very important taxation system of India alongside GST as well. Let us see why it is so important for India.
Tax Saving SIP and also GST will bring uniform taxation through India to all forms of production and services of a product. The most important point of the GST is that it will tax Economic activity at every stage of production at the same rate.
Now first of all, the GST is also a Value Added Tax that means producers at any stage of economic activity have to only give tax on the value added to the product, not on the final output. It's not tax on taxes.
Now to show how much value he has added to the product for taxation he has to show the invoice for the purchase of raw material or product from the previous stage. If he is not able to show the Invoice he will have to pay the tax on complete output.
So by generation of Invoice tax evasion will be checked completely and the government will get complete and proper share of the tax imposed.
Also the present scenario where middlemen take away the major factor of tax by helping businesses or manufacturers in tax evasion will stop. The police and babu's bribe business while crossing state borders will completely finish. This will help in timely delivery of goods across different parts of India.
Now as we know GST is a Value Added Tax. That means it will not follow the prior tax regime of taxing a product/commodity/services on the final cost at every stage.
What GST will do is it will tax the product/commodity/services on the value addition at each step. So ultimately the producer will pay less tax and the end user will obtain the product at a cheaper price.
Now in the previous point we have seen that After implementation of a full fledged GST across India the overall cost of the Product will decrease for the end user. Now when the cost will go down, consumers will start consuming more and hence demand of the product will go up leading to the supply of product in bigger quantities which will ultimately lead to more and more production. And hence GDP will rise.
Also there will be no tax invasion hence the government will get proper tax inflow and revenues will increase which will enable the government to invest money in infrastructures and other ventures will add to the increase of GDP of India.
This seems to be a long term benefit of GST. Since GST will ultimately help in decreasing the prices of the commodities, the end user, that is us, will spend less money purchasing the same item which will save us some money. Hence saving power of Indians will increase and those savings will be invested in different ways mainly in bank accounts which will further help in increase of GDP indirectly.
