Goods and Service Tax in India: Here are the 10 Benefits of the GST Bill

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In a historic development, the Rajya Sabha passed the constitutional

amendment paving the way for the Goods & Services Tax (GST).

The GST Council on Saturday fixed a 5 per cent tax rate on small hotels

and restaurants and approved draft of key supporting legislation's to

enable roll out of the new indirect tax regime from July 1 2017.

The reform is expected to bump up GDP by about a percentage point or

even more.

Here's a look at GST's Benefits:

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1. Life Gets SimplerGST will replace 17 indirect tax levies and compliance costs will fall.

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2. Revenue Will Get a Boost

1. Evasion set to drop.

2. Input tax credit will encourage suppliers to pay taxes.

3. States and Centre will have dual oversight.

4. The number of tax exempt goods will decline.

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It's currently fragmented along state lines, pushing costs up 20-30%.

3. A Common Market

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4. Logistics, Inventory Costs will Fall

Checks at state borders slow movement of trucks. In India, they travel 280 km a day compared with 800 km in the US.

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For many capital goods, input tax credit is notavailable. Full input tax credit under GST willmean a 12-14% drop in the cost of capitalgoods. Expected: A 6% rise in capital goodsinvestment, 2% overall.

5. Investment Boost

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6. Make in IndiaManufacturing will get more competitive asGST addresses cascading of tax, inter-statetax, high logistics costs and fragmentedmarket. Increased protection from imports asGST provides for appropriate countervailingduty.

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The current 2% inter-state levy meansproduction is kept within a state. Under the GSTnational market, this can be dispersed, creatingopportunities for others.

7. Less Developed States Get a Lift

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8. Manufactured Goods Could Become Cheaper

Lower logistics and tax costs.

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HSBC estimates an 80 basis point rise in GDPgrowth over 3-5 years. NCAER pegs this at 0.9-1.7% thanks to the elimination of taxcascading.

9. GDP Lift

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10. Freeing up Online

State restrictions and levies have complicated ecommerce. Some sellers do not even ship to particular states. All this will end with GST.

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