July 1st is celebrated as GST day in India, commemorating the tax reform in the country. The unprecedented reform resolves the previously complicated Indian tax system. The tenuous indirect assessments and multi-tier interface vexed the public and the government officials. GST aims to substitute all taxing under one comprising all. This helps in efficient economic growth, ensuring proper organization, In this article, we have explained “Why and When GST”
What is GST?
Goods and Service Tax (GST) is an indirect umbrella tax in India, intended to replace other indirect taxes like Value Added Tax (VAT). GST came into effect on July 1st, 2017, and was levied based on supply and value addition. The comprehensive, stratified, destination-based tax functions as the single, coherent domestic tax of the country. The GST bill had been evolving since 2000, for 17 years, after which it was passed, and the law came into effect.
Why and When GST?
According to Bajaj Finserv, a leading financial services company, the centralization of taxes unifies the Indian market and economy. The cascading, successive methods of the previously existent taxes caused the higher tax prices, constructively avoided by GST in the long run. In addition, the model GST paves the way to prevent corruption, helping better supervision in unorganized sectors. Possible tax evasion is also highly contained due to the simplified taxation.
GST Day 2021
The celebration of the 1st GST day included listing the remarkable successes achieved that year, followed by the motto, “One Nation, One Tax, One Market.” The tax implementation was deemed to be the 2nd historic moment in India’s independence despite the initial hardships. GST returns have also proved the willingness of citizens to assist tax reforms in the country.
Why is tax payment necessary?
Taxes paid by citizens contribute to their economic benefit via services and operations. They basically help the government run the country as a budget and source of income. This helps to finance public sector services that indeed aid the population. These include healthcare, defense, and the legal administration of the country. In addition, tax payments help foster social security and the development of the economy. Architecture and education are also aided by tax funding.
GST also helps level the inequalities in income due to the progressive structure. The income effect is curved due to the reduced purchasing power of taxpayers. There is also a substitution effect imposed between taxed and untaxed goods. GST checks all the necessities of tax and helps consolidate all the indirect taxes under one umbrella factor.
Tax evasion is the illegal practice of deliberately avoiding the payment of taxes to the government. Tax evasion is considered a criminal offence, and the entity doing so is liable to judicial charges and penalties. The practice of evasion or avoidance affects the tax revenue, which leads to the lack of financing for public sector services. With basic expenses excluded, the functioning of these necessary services gets affected, undeniably agitating the general public. GST Day helps create awareness against such practices.
As responsible citizens, it is necessary to acknowledge our duty towards the government, society and consequently ourselves and act accordingly. We need to vow to pay our taxes on time and understand the benefits of “Why and When GST” grants us, personally and economically.
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