Unravelling GST!

Have you ever pondered over the price you pay for the goods you buy, over the raw material expenses and the overall tax that government is charging you over the goods? It’s high time since the GST bill’s constitutional amendment is being talked about and we as citizens are unaware of it’s basic principle and working.

Here is the GST bill unravelled!

Suppose one fine day you plan to sell the food that’s made in your kitchen. You buy vegetables, spices, use your cooking gas over it. Suppose the raw materials you’ve been using costs you a sum of Rs. 100, now this sum already includes a tax payment of rupee 10 say at a tax rate of 10%. Now when you process food, lets say you invest in a sum of Rs. 20 more while using your resources processing it. Now the total value of your food becomes 100+20= 120. According to a tax payment at rate 10%, this sum corresponds to a tax of Rs. 12. Now do you see the glitch? This Rs. 12 already includes a tax that you’ve paid in buying the raw materials. So, the actual tax that you are to pay is 12-10= Rs. 2.

So can you imagine this scenario when extended to various stages of processing will accumulate a large sum of tax that a consumer has to pay including indirect taxes like luxury, excise duties VATs etc. This system has a number of bottlenecks as the companies have to pay a huge sum of taxes for selling it’s goods across the state. Not only will this do away with the excess taxes, but will give the regional competitors and start ups a chance to become national brands. Goods and Services tax bill is about bringing a tax reform in this imbroglio, and using a uniform and correct approach to impose taxes on it’s citizens. Also it is going to decrease the overhead for tax collection charges on the government. It sure is going to bring a about a revolutionary change in the taxation system of India, but there is a major setback to it too, it does not apply to lucrative sectors like Oil, real estate and alcohol, but will increase the prices of the tax on our mobile phone bills from 15% to 18% as is mandated by GST. Also there are other political obstacles to its amendment in April 2017. The opposition wants the constitutional amendment to specify the tax rate. It’s been given a whole lot of time just because the fact that any further changes to the tax bill will require a lengthy amendment process again.

Besides all of this happening, all we can do as citizens is play martinet in paying taxes as we see the government officials hustle for this radical change. 16 years is one hell of a time waiting for such a reform, where it is going to be easy for companies to conduct a business and carry out its logistic processions. So we are all tied up for another epochal era of government’s remarkable reform measures. Hurray!


Published by Jasmeet

A Marketing professional, hobbyist food blogger and a social media influencer. Loves to write and design.

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