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How GST assists in improving India's "Ease of Doing Business" Ranking

How GST helped to improve Indias Ease of Doing Business Ranking

GST is capable of boosting India's GDP or Gross Domestic Product rate by 1.5-2 percent over the long term. This tax will deliver significant benefits by improved taxation efficiency and ease of doing business. The notion of ‘One Nation, One Tax’ converts India into a huge common market. The proposed system is more transparent, more paperless, but requires greater compliance as well. Prior to GST, indirect taxes in India have driven businesses to restructure and model their supply chain and systems owing to the multiplicity of taxes and costs involved. GST regime is going to be proved as business-friendly and pro-development tax reform in the long run.

Here are certain noteworthy ways in which GST can help India improve the ranking:

  1. Tax classification: With GST, our taxes are already categorized into 3 sectors namely SGST, CGST, and IGST imposed by the state government, central government and integrated tax on sales of products. Also, depending upon the nature of goods and services, our tax rates can also be categorized as 5%, 12%, 18% and 28%.
  2. No to cascading taxes: GST reduces the ‘tax on tax’ or cascading taxes, thus, it brings down the overall cost of goods. This further benefits businesses in maintaining the better cash flow and effective working capital management.
  3. Input tax credit: It is one of the most beneficial features of GST. Input credit under GST implies that at the time of paying tax on output, manufacturers or service providers can reduce their tax payable by the amount they have already paid on inputs. So, you won’t be charged over for the goods and services for which you already made the payments.
  4. Freedom to set up warehouses: Usually tax rating varies from state to state, but a declaration of GST marked the unification of taxes. Thus, it gives the companies to choose their warehouses as per their business requirement, rather than on the basis of choosing optimum cost involved.
  5. Reduced transportation costs: Due to a reduction in long and winding queues at border checkpoints and entry points, the transportation cost of products and commodities is also reduced. As per the World Bank report, corporates and e-commerce businesses can save up to 40 % of their logistics costs incurred at check-posts and toll plazas.GST council have reduced the rate of tax on some goods from 28% to 18%. For manufacturers or service providers, GST helps in ease-of-doing business by eliminating the recurring multiple taxes.

Enroll in our detailed course on GST to improve your understanding and stay updated. Visit Munimji website for more info.

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