{"id":16833,"date":"2020-09-24T11:39:46","date_gmt":"2020-09-24T06:09:46","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=16833"},"modified":"2020-09-24T11:39:48","modified_gmt":"2020-09-24T06:09:48","slug":"implementation-of-gst-in-place-of-vat-in-indian-economy","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/","title":{"rendered":"Implementation of GST in place of VAT in Indian Economy"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Indian Economy is one of the economies that spend a huge sum of money towards tax paid. GST had combined all the indirect taxes together and made one tax. It is applicable from the beginning of manufacturing till the end in order to maintain uniformity among the system. Implementation of GST can bring the central and sales tax together. Multiple taxes have been reduced after the Implementation of GST in the Indian Economy.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/#What_is_VAT\" >What is VAT?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/#What_is_the_Difference_between_GST_VAT\" >What is the Difference between GST &amp; VAT?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/#Indian_Economy_before_Implementation_of_GST\" >Indian Economy before Implementation of GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/#Indian_Economy_after_Implementation_of_GST\" >Indian Economy after Implementation of GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_VAT\"><\/span>What is VAT?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Value Added Tax is known as VAT which is an\nindirect tax that was introduced in Indian taxation system on 1<sup>st<\/sup>\nApril, 2005. As per the concept of taxation, VAT replaced the Sales Tax in the\npresent situation.<\/p>\n\n\n\n<p>VAT was introduced in India to make a single integrated market. On 2<sup>nd<\/sup> June, 2014, VAT was introduced in all states and union territories of India, excluding Andaman and Nicobar Islands and Lakshadweep Islands.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Disadvantages\nof VAT<\/h3>\n\n\n\n<p><em><strong>The disadvantages of VAT are as follows-<\/strong><\/em><\/p>\n\n\n\n<ul><li>It was not possible to claim Input Tax Credit (ITC) under VAT;<\/li><li>Different rates in different states;<\/li><li>Different laws in every state;<\/li><li>Cascading effect of taxes.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">What is the cascading effect?<\/h3>\n\n\n\n<p>Cascading effect is when tax&nbsp;levied on a product\nat every step of manufacturing. The tax levied on a value that includes tax\npaid by the previous buyer. Cascading effects makes the end consumer pay tax on\nalready paid tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Difference_between_GST_VAT\"><\/span>What is the Difference between GST &amp; VAT?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>GST&nbsp;has been designed to be a single,\ncomprehensive, destination-based tax concept that will unify the entire country\nin terms of how the tax is collected. The Goods and Services Tax intends to\neliminate the concept of \u201ctax on tax\u201d (Double Taxation) also known as cascading\neffects.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Indian_Economy_before_Implementation_of_GST\"><\/span>Indian Economy before Implementation of GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>Before the introduction of GST, the manufacturer, wholesaler, and retailer imposes VAT at 12.5% on customers.<\/strong><\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"628\" height=\"424\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-95.png\" alt=\"Indian Economy before Implementation of GST\" class=\"wp-image-16834\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-95.png 628w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-95-300x203.png 300w\" sizes=\"(max-width: 628px) 100vw, 628px\" \/><\/figure><\/div>\n\n\n\n<p>The above table shows a clear specification about how the customers were forced to practice the multiple tax system. The tax on tax is also known as cascading effects of the tax which led in inflation in the prices of goods and services<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/list-of-goods-and-services-where-gst-is-applicable-latest-rates\/\">List of Goods and Services where GST is Applicable: Latest Rates<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Indian_Economy_after_Implementation_of_GST\"><\/span>Indian Economy after Implementation of GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>Goods and Service Tax Act<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Goods_and_Services_Tax_(India)\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> was first brought by Loksabha on 29<sup>th<\/sup> March 2017 and was implemented on 1<sup>st<\/sup> July 2017. Law took initiative and combined most of the indirect taxes that existed during that period. Moreover, the multiple taxes implemented by the government GST (12%) + State GST (12%). The central excise duty, additional excise duty, special additional duty &amp; service tax were merged into a single tax.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Benefits by the adoption of GST<\/h3>\n\n\n\n<p><em><strong>The benefits are as follows-&nbsp; <\/strong><\/em><\/p>\n\n\n\n<ul><li>Removal of cascading system;<\/li><li>Possibility of hike in the\nrevenue;<\/li><li>Lessening the burden on the end\nconsumer;<\/li><li>Individual can lead simpler life\nat lower cost;<\/li><li>Improvement in the low\nperforming states;<\/li><li>Control in black money\ncirculation;<\/li><li>Common market to perform trade\nactivities.<\/li><li>Boost in make in India project;<\/li><li>Better and best investment\nplanning;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">The\nShort-Term Impact of Implementation of GST<\/h3>\n\n\n\n<p>From the customer\u2019s viewpoint, they are now paying more\ntax for almost every goods and services they consume. The majority of everyday products\ndraw the same or a slightly higher&nbsp;tax rate. <\/p>\n\n\n\n<p>Moreover, the Implementation of GST has a\ncompliance cost attached to it. It seems that this compliance cost will be high-priced\nfor the small scale manufacturers and sellers. They can end up pricing their products\nat higher rate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Future Scenario-\nImplementation of GST<\/h3>\n\n\n\n<p>Talking about the future scenario, it is anticipated\nthat GST would not just mean a lower tax rate, but also minimum tax slabs.\nCountries where the GST has helped in improving the economy, apply only for 2-3%\nrates \u2013 one being a lower rate for essential commodities, and a higher rate of\ntax for the luxurious commodities. <\/p>\n\n\n\n<p>Presently in India, we have 5 tax slabs, with 3 tax\nrates \u2013 an integrated rate, a central rate, and a state rate + cess. The government\nis playing on lower rates due to fear of losing out revenue. This is very doubtful\nto see a shift anytime soon; though the government has said that rates may be\nrevisited once the&nbsp;Revenue Neutral Rate&nbsp;is reached.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>By implementing GST on goods and services, the\nIndian government is improving the economy by removing the cascading system of\ntax and reorganizing the business process in India.<\/p>\n\n\n\n<p>Our&nbsp;<a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a>&nbsp;professionals will be at your assistance if you want expert advice on any aspect of <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>GST registration<\/strong><\/a>, implications, or compliance, and any Government Licensing. We will help you with all your compliances concerning the issues related to GST applicability-based on your anticipated activities, ensuring well-timed completion of your work.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/implementation-of-delinking-credit-debit-notes-on-the-gstn-portal\/\">Implementation of Delinking Credit\/Debit Notes on the GSTN Portal<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Indian Economy is one of the economies that spend a huge sum of money towards tax paid. GST had combined all the indirect taxes together and made one tax. It is applicable from the beginning of manufacturing till the end in order to maintain uniformity among the system. Implementation of GST can bring the central [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":16853,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1031],"acf":{"service_id":"96"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":5800,"readingTime":3,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16833"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=16833"}],"version-history":[{"count":7,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16833\/revisions"}],"predecessor-version":[{"id":16854,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16833\/revisions\/16854"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/16853"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=16833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=16833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=16833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}