DIFFERENCE BETWEEN GST & EXCISE DUTIES?
INTRODUCTION
- GST stands for Goods and Services Tax. It is a comprehensive indirect tax that is levied on the supply of goods and services in India. GST was introduced in India on July 1, 2017, and has replaced a number of indirect taxes, including excise duty, service tax, and VAT.
- Excise duty is a tax that is levied on the manufacture of goods in India. It is levied by the central government and is collected at the point of manufacture. Excise duty is also levied on certain imported goods.
ADVANTAGES OF GST & EXCISE DUTIES
- Simplified Tax Structure: GST has replaced a complex tax structure with a unified tax system. It combines various indirect taxes like central excise, service tax, VAT, and more into a single tax, making compliance easier.
- Elimination of Cascading Taxation: GST allows businesses to claim input tax credit (ITC) on the taxes paid on their purchases. This eliminates the cascading effect of taxes, ensuring that taxes are only paid on the value added at each stage of the supply chain.
- Reduced Tax Evasion: GST is designed to be a more transparent tax system. With the introduction of electronic filing and real-time invoice matching, it becomes harder for businesses to evade taxes.
- Wider Tax Base: GST includes a broader range of goods and services in its tax net, which helps to increase the tax base and reduce the scope for black money and tax evasion.
- Uniform Tax Rates: GST aims to create uniform tax rates across the country, eliminating tax rate disparities between states and promoting the ease of doing business.
- Boost to Economic Growth: By reducing the tax burden on businesses and streamlining the taxation system, GST can boost economic growth and improve the competitiveness of Indian businesses.
- Simplified Compliance: With the use of technology and online filing, GST compliance has become more accessible and efficient for businesses.
DISADVANTAGES OF GST & EXCISE DUTIES
- Initial Implementation Challenges: The transition to GST initially posed significant challenges for businesses, particularly small and medium-sized enterprises (SMEs), as they had to adapt to a new tax system and compliance procedures.
- Complexity in Tax Slabs: GST has multiple tax slabs (e.g., 5%, 12%, 18%, and 28%), and the classification of goods and services into these slabs can be complex, leading to confusion and disputes.
- IT Infrastructure Requirements: To comply with GST, businesses need robust IT infrastructure for electronic filing and invoice matching. This can be a burden for smaller businesses with limited technological capabilities.
- Increased Compliance Burden: While GST aims to streamline taxation, businesses still need to file multiple returns and maintain extensive documentation, which can be time-consuming and administratively burdensome.
- Impact on Service Sector: The service sector faced challenges with GST, as some services that were previously exempted or had lower tax rates now fall under the 18% or 28% tax slab, leading to increased costs for consumers.
- Input Tax Credit Complexity: While GST allows for input tax credit (ITC), claiming and managing ITC can be complicated, leading to disputes and delays in refunds.
- Impact on Small Businesses: Smaller businesses may face difficulties in adapting to the new tax regime and may experience cash flow issues due to the delayed availability of ITC.
KEYPOINT
- Scope: GST applies to all goods and services, while excise duty only applies to the manufacture of goods.
- Point of taxation: GST is levied at the point of supply, while excise duty is levied at the point of removal of goods from the factory.
- Rate: GST has multiple rates, while excise duty has a single rate for most goods.
- Administration: GST is administered by the central and state governments, while excise duty is administered by the central government.
- Advantages: GST eliminates cascading taxes, boosts economic growth, and is a transparent tax. Excise duty simplifies the tax structure and is easy to administer.
- Disadvantages: GST is complex and can lead to an increase in prices. Excise duty can be evaded easily.
CONCLUSION
GST is a major tax reform in India that has the potential to simplify the tax system and boost economic growth. However, it is a complex tax with a number of challenges. It is important for businesses to understand the GST law and comply with its requirements.
HOW AURIGA ACCOUNTING HELP YOU TO GST & EXCISE DUTIES
- GST compliance: Auriga Accounting can help you understand the GST law and comply with its requirements. This includes registering for GST, filing returns, and paying taxes.
- Excise duty compliance: Auriga Accounting can also help you comply with excise duty laws. This includes registering for excise duty, filing returns, and paying taxes.
- Tax advisory: Auriga Accounting private limited can provide you with tax advisory services on GST and excise duties. This includes helping you choose the right tax structure, optimize your tax liability, and stay compliant with the law.
- Software solutions: Auriga Accounting private limited offers a suite of software solutions that can help you manage your GST and excise duty compliance. These solutions can help you automate your compliance processes, track your tax liability, and generate reports.
