All You Need To Know About GST
Businesses operating worldwide are liable to pay taxes on the transactions(primarily sales) they make. The tax laws differ from country to country, and business to business. Every country has different tax laws governing the financial transactions made by the corporate entities. One such tax law is GST. GST is a commonly operated tax in many countries around the world. But, there are different slabs to it in every country and different rates of tax. Let us understand what GST is and how does it affect the businesses around the globe.
What Is GST?
Goods and Services Tax or General Sales Tax, or as it is more commonly known as, GST is a combined taxation policy that eliminates the tax filing for states and provinces, and the central government, separately. GST has replaced the VAT or Value Added Tax in most of the countries. It has combined the taxes on goods and services sold within the country borders.
How Is It Calculated?
GST is calculated as a percentage of the sale value of the product or the service. As already mentioned, different countries have different tax rates, currently, India has the highest rate of GST at 28%, followed by France and the United Kingdoms at 20%. The goods and services are divided into slabs adhering to different rates of applicable tax. For example, Singapore levies GST of around 7% ( https://www.e-sandhurst.com/goods-and-services-tax-gst/) on goods and services depending upon their applicability. Having said that, not all products and services are taxed under GST. A few of the products and select services are exempted from GST or any tax like the food and dairy products, considering the demand and supply.
GST has made sure that any product or service is not taxed twice. More or less, the rate of tax before and after the reformation of GST has been kept the same in order to keep the revenue generated by the state and central governments remain the same.
Who Is Liable To Pay GST?
With the implementation of GST, a common tax is levied on the products and services, that is paid once, and can be reimbursed by the seller or reseller. Having said that, it can readily be understood that the GST is ultimately paid by the end user. For goods and services that are produced and sold within the same country, the GST levied is stable. For the goods and services that are produced in a different country and sold in another, the GST levied may vary. Depending upon the transit route and the inclusion of the goods or services in any of the slab, the tax may include GST, customs charges, and logistic taxes. For example, a product that is manufactured in China and sold in the U.S. the seller will have to pay at the customs, then the logistics and then customs at the borders of the importing country along with the GST levied by the importing country. All of these taxes, though are initially paid by the seller, are reimbursed once the product reaches the retailer or the end user.
As already mentioned, the tax levied before and after the implementation of GST has not changed much, this has actually not affected the revenue much, but the process has become smoother and hassle-free.
Is GST Good Or Bad For Country’s Economy?
The earlier taxation policies were tedious and tiresome. With the reformation of the tax laws and implications of GST, the tax filing process has smoothened out tremendously. Before GST, the tax was to be paid in parts. For example, there was a transportation tax, sales tax, service tax, etc. With the reforms in place, the process has smoothened out for the tax collectors. But as far as the taxpayers are concerned, the process has brought in more confusion. It is absolutely not that easy to remark whether GST has proved to be beneficial for the country’s economic development.
Though many countries have adapted to the GST system, there is still scope for improvement. Considering the budding entrepreneurs, the ease of starting a business and developing it within no time is a crucial factor. Considering the tax policies and the registration forms for the new business in the country is thus very important. The GST has refined the process for these new-comers and eased out their tasks to a great extent.
The pace of global development and economic growth has led to countries rethinking and reforming their tax policies. Every country wishes to establish a friendly rewarding business environment. With the GST, we believe that a stable economic environment with potential for innovation and clear transactions can be established.