With the implementation of GST , three sectors will benefit the most :
It is a comprehensive tax imposed on manufacture, sale and consumption of goods and services at a national level.
The Bill’s draft does away with the additional tax on the movement of goods across state boundaries. States will be compensated for revenue losses in the first 5 years of implementation of GST and a mechanism has been put in place to decide on conflicts between states, if any.
As a GST registered the business, you will hold the tax which you have collected from your customers for up to 4 months before you are required to pay it to us. This money could be placed in a business deposit account to earn interest for your business.
You must remember though, that this money doesn’t belong to the business and should not be used to supplement cash flow.
First, the importer buys a television from overseas for £400(Rs. 28874.50) but experiences a further cost of £200(Rs.14437.25) in packaging, transport, insurance fees and other Customs duties. These costs are considered to be part of the value of the television and, at the time of import, the importer must so pay £30 in GST , signifying 5% of £600(Rs. 43311.75). On the other hand, since the importer can reclaim the £30 he paid as GST to customs, the net cost is only £600(Rs. 43311.75).
When the importer adds his mark up of £200(Rs.14437.25), his selling price to the wholesaler becomes £800, to which GST of 5% (£40- Rs. 2887.45) is added, making a GST inclusive price of £840(Rs.60636.45). However, the cost to the wholesaler is only £800 (Rs. 57749.00), since he is also able to reclaim the £40 (Rs. 2887.45) of GST .
After adding his markup of £200(Rs.14437.25) the wholesaler sells the television to the retailer for £1,000 (Rs. 72186.25) plus 5% GST of £50 (Rs. 3609.31), making the selling price £1,050(Rs. 75795.57). Again, the retailer is able to reclaim the GST of £50(Rs. 3609.31), so the actual cost to him is only £1,000 (Rs. 72186.25).
Finally, the retailer sells the television to a consumer and applies his markup of £200(Rs.14437.25), making the selling price £1,200 (Rs. 86623.50) to which 5% GST (£60- Rs. 4331.18) is added. The consumer pays £1,260 (Rs. 90954.68)(GST inclusive) and pays the full cost of the £60 (Rs. 4331.18) of GST in the final selling price.
Since all the registered traders involved in the sale have been able to claim back the GST paid on the television, there is no cascading tax effect on the consumer, who doesn’t pay GST on GST.