The imposition of GST is on the provision of goods and services, and it is an indirect tax. It is enforceable at every level of the supply network, ranging from the producer to the ultimate purchaser. The computation of GST is based on the increase in value at each stage of the supply network. The Indian government has numerous advantages from the implementation of the Goods and Services Tax (GST).

Here are some key ways in which GST benefits the Indian government:

Increased Tax Revenue: By including more businesses and transactions within the tax net, GST has broadened the tax base and replaced various indirect taxes such as central excise, service tax, and VAT. As a result, the government has experienced an increase in tax revenue.

Simplified Tax Structure: The implementation of GST has brought about a simplified tax structure that has replaced various indirect taxes with a single tax. This has resulted in a streamlined tax administration, making it easier for businesses to adhere to tax regulations. As a result, tax evasion has decreased and tax compliance has improved, leading to an increase in tax revenue for the government.

Elimination of Cascading Effect: The implementation of GST has eradicated the tax on tax or cascading effect. This has enabled businesses to receive input tax credit for the taxes paid in the previous stage of the supply chain. As a result, taxes are levied only on the value added at each stage of the supply chain. The removal of the cascading effect enhances the effectiveness of the tax system and diminishes the tax burden for both businesses and consumers.

Increased Transparency: The tax system GST is technology-based and necessitates that businesses uphold digital records, submit frequent returns, and carry out online transactions. This digitalization and openness in the tax system aid in lowering corruption, tax avoidance, and the utilization of unrecorded money. The amplified transparency assists the government in more effectively observing and implementing tax conformity.

Simplified Interstate Trade: The elimination of entry taxes and other barriers through GST has enabled the smooth movement of goods and services across state borders. This has led to a decrease in transportation and logistics expenses, enhanced supply chain efficiency, and a surge in interstate trade. The rise in interstate trade has a positive impact on economic growth and generates more tax revenue for the government.

Better Tax Administration and Compliance: The Goods and Services Tax Network (GSTN) is the sole authority for tax administration under GST. This centralization facilitates improved coordination and information exchange between state and central tax authorities. Additionally, it offers a uniform platform for businesses to register, file returns, and pay taxes. The simplified tax administration and compliance procedures ensure enhanced efficiency and effectiveness in tax collection for the government.

The Indian government has reaped substantial advantages from GST, such as augmented tax revenue, streamlined tax framework, mitigated tax avoidance, better adherence, and amplified transparency. These benefits support the government’s objectives of advancing economic growth, minimizing tax inefficiencies, and establishing a more resilient and structured indirect tax system.

Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].