What GST Means For The Common Man & Its Effect Thereon?

France was the first one to introduce Goods and Service Tax. In India, the introduction of Goods and Service Tax (GST) has been marked as the most revolutionary tax reform. India has made Goods and Service Tax (GST) effective from 1^st July 2017.  With the introduction of GST, several central taxes and state taxes have been merged into GST, which mainly eliminated the cascading effect of taxes.

After more than two years of introduction of GST, the common man is still trying to figure out the means of GST and its impact thereon. It is important to analyze and understand what is meant by GST for the common man and how GST affects the common man’s life. The present article tries to come up with the analysis of the means and impact of GST on the common man. 

What GST means for the Common Man?

From common man’s perspective, GST simply means payment of single indirect taxes instead of several erstwhile central taxes and state taxes like Excise duty; Service tax; VAT / Sales tax; Central Sales Tax; Purchase Tax; Luxury tax etc.

GST is levied on the supply of goods and services. GST is a dual levy that would be simultaneously levied by both Centre and State. In the case of supply within state/union territory (i.e. intra-state supply), GST will have two components i.e. Central Tax (CGST) and State Tax/ Union Territory Tax (SGST / UTGST).

Further, in case of a supply in different states (i.e. inter-state supply), GST will have only one component known as Integrated Tax (IGST). IGST would be levied at the rates equal to the sum total of CGST and SGST / UTGST

It is important to understand that the GST tax slabs are divided into four different rates like 5%, 12%, 18%, and 28%. The rates of GST are revised several items after the introduction of GST. However, it should be noted that the food products and other essential items are either taxed at 0% or at 5%, whereas, the luxury items are taxed at higher GST rates.

It can be concluded that due to the lower GST rates on the essential items, and the abolition of other indirect taxes and removal of the cascading effect of taxes, GST has marked a favorable effect on the common man’s budget.

How GST would affect the Common Man’s life?

Positive effect/impact of GST and negative effect/impact of GST on the common man’s life is explained in the below paras.

Figuring out some positive impact of GST on the common man –

Introduction of GST, subsuming various central and state taxes has resulted in the simplification of the tax structure. Such a simple tax structure of GST helps the common man to understand and implement the same easily and effectively. The simple structure also increases transparency in the system which in turn helps the consumer to clearly know the quantum and base of taxes.

Further, the basic aim for the introduction of GST is the removal of the cascading effect of tax on tax. GST is formed with a motto ‘One Nation One Tax’. Such removal of the cascading effect has lowered the average cost burden of the common man.

Due to the removal of the cascading effect and availability of input tax credit (ITC) of GST paid, there is less burden of taxes on the manufacturing and service sector resulting in less cost in both manufacturing and service price.

Figuring out some negative impact of GST on the common man –

GST has brought along with its huge list of compliance in the form of return filing. Such a huge compliance requirement has made it difficult for the common man to deal with the same. Further, the huge compliance requirement has also resulted in huge compliance costs making it even more difficult for the common man.

Since the implementation of GST, various amendments are being introduced be it in the form of rates or returns etc., which has made the law quite complicated. It is almost impossible for the common man to keep oneself updated with the frequent amendments.

Entire compliance under GST has been digitized, which has a positive effect in terms of reduced corruption. However, due to complete digitization, common man requires experts to deal with their day to day GST compliance.

Conclusion –

Even though the common man has positively adopted the implementation of GST, the frequent amendments; huge compliance and requirement of expert technical know-how has spoiled the game to some extent.