No clue about GST? This is for you
- by admin
The Goods and Services Tax (GST) is something you ought to be aware of if you are a business owner in India. The implementation of GST in India has given rise to a lot of confusion and mixed reactions. Regardless, these are some fundamentals that you need to know about.
What is GST in India?
The Goods and Services Tax is a single, comprehensive, indirect tax introduced to absorb the plethora of indirect taxes levied at different stages.
What are some advantages of GST in India?
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Here are some of the most significant advantages of GST:
- GST is known to have played a significant role in the removal of the cascading effect of all the taxes under the previous tax system. Examples of such taxes include Value Added Tax (VAT), inter-state tax, logistics, excise duty, and so on. These taxes were levied at various stages, and the GST tax rates would vary with each state.
- Another point in GST’s favor is the fact that it has vastly simplified the process of tax calculation, which is not the case with the previous tax structure.
- In addition to the two benefits mentioned above, GST has made provisions for a composition scheme under GST that can aid relatively small businesses, has crystal clear rules for E-commerce and logistics, thereby making them efficient.
What are some of the Disadvantages of GST in India?
Here are a couple of disadvantages of GST in India:
- The primary issue with GST is that all companies are forced to spend a considerable amount of money and time in updating their current account software or buying new software to ensure they comply with the GST rules.
- Furthermore, companies have also had to spend money on getting tax professionals onboard to ensure they get the employees up to speed on everything GST-related. In simple words, it is an operational expense and a pretty significant one at that.
GST on Real Estate
GST’s implementation has managed to make waves in the real estate sector, which is a big deal considering how it accounts for up to 8% of the country’s economy.
GST on Buyers
Buyers were subject to taxes like VAT and service tax, and so on under the previous tax structure. These taxes were different in every state, and the developers would have to pay taxes like customs duty, sales tax, and so on. However, with the GST in place, the GST tax rate applied to properties under construction from April 1st, 2019, was 12%. In the long run, the Goods and Services Tax will prove to be useful if it can make provisions for the benefit of the Input Tax Credit (ITC) to go from the developer to the buyer.
GST on Builders and Developers
Developers would have to bear the brunt of handling taxes like Excise duty, customs, VAT, service taxes, etc. on essential services under the previous tax structure. ITC was not available previously, which means that these taxes were added to the overall costs.
However, the implementation of GST has witnessed a decline in the expenses because of the subsumption of multiple taxes and the availability of Input Tax Credit. GST has already reduced logistics costs.
However, the problem is that there are too many complicated calculations to drum up the final ITC before it is passed on to the buyer from the developer. It can only be done in the final stages. The lack of transparency around ITC has made the buyers delay their property purchases.
When does GST not apply to Real Estate?
The Goods and Services Tax on real estate does not apply in certain situations. Here are those situations:
- Reselling property
- Buying or selling a piece of land
- Selling a flat that is ready to use
It is important to note that supplying goods or services is not a part of this. This means GST on real estate does not apply to the supply of goods or services. This should give you a decent idea of what GST is and how it works.
The Goods and Services Tax (GST) is something you ought to be aware of if you are a business owner in India. The implementation of GST in India has given rise to a lot of confusion and mixed reactions. Regardless, these are some fundamentals that you need to know about. What is GST in India?…
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