GST is applicable at every stage where a product or service receives value addition. It comes with input tax benefit with the help of which manufacturers and service providers can offset the input tax they have already paid while paying the output tax.
So, the traditional ‘tax-on-tax’ regime or the cascading effect of taxation is effectively eliminated by GST. This advantage of GST not only helps manufacturers and service providers to reduce their tax liability but also helps in reducing the overall cost of goods and services.
SIMPLIFICATION AND STREAMLINING
One of the primary objectives of GST is to simplify the tax structure. By replacing multiple taxes with a single tax, GST eliminates the cascading effect of taxes, where taxes are levied on top of taxes, resulting in increased prices for consumers. This simplification makes the tax system more transparent, efficient, and easier to comply with for businesses and taxpayers.
SOCIAL WELFARE AND INCLUSIVE GROWTH
GST has provisions for exempting essential goods and providing relief to low-income individuals through lower tax rates. It helps in reducing the tax burden on common goods and services, making them more affordable for the masses. Additionally, with increased tax revenue, governments can allocate funds for social welfare programs, infrastructure development, education, healthcare, and other public services, leading to inclusive growth and development.
COMPETITIVE ADVANTAGE
Implementing GST brings countries in line with international tax systems and best practices. This enhances the ease of doing business, promotes international trade, and improves the competitiveness of the country in the global market. It also attracts foreign investment by creating a more favorable and predictable business environment.
EFFICIENT RESOURCE ALLOCATION
GST promotes efficient allocation of resources across sectors and states. With the elimination of inter-state tax barriers, businesses can choose their production and distribution locations based on economic factors rather than tax considerations. This leads to optimal utilization of resources, better economies of scale, and increased productivity.
Overall, GST is important because it simplifies the tax system, promotes economic growth, reduces tax evasion, enhances resource allocation, simplifies compliance, provides a competitive advantage, and contributes to social welfare and inclusive growth.
