Page 5 - CA Final GST

Badlani Classes

tax payer pays the same without actually knowing that he is paying
tax to the Government. Thus, tax payer does not perceive a direct
pinch while paying indirect taxes.
5- Inflationary: Tax imposed on commodities and services causes an
all-round price spiral. In other words, indirect taxation directly
affects the prices of commodities and services and leads to
inflationary trend.
6- Wider tax base: Unlike direct taxes, the indirect taxes have a wide
tax base. Majority of the products or services are subject to indirect
taxes with low thresholds.
7- Promotes social welfare: High taxes are imposed on the
consumption of harmful products (also known as ‘sin goods’) such
as alcoholic products, tobacco products etc. This not only checks
their consumption but also enables the State to collect substantial
revenue.
8- Regressive in nature: Generally, the indirect taxes are regressive in
nature. The rich and the poor have to pay the same rate of indirect
taxes on certain commodities of mass consumption. This may further
increase the income disparities between the rich and the poor.
CONCEPT OF GST
1- VAT :GST is a value added tax levied on manufacture, sale and
1- VAT consumption of goods and services
2- Continuous chain of 2- Continuous chain of tax credits: GST offers comprehensive and
tax credits continuous chain of tax credits from the producer's point/service
3- Burden born by provider's point upto the retailer's level/consumer’s level thereby
consumer taxing only the value added at each stage of supply chain.
4- No cascading tax 3- Burden born by consumer: The supplier at each stage is

permitted to avail credit of GST paid on the purchase of goods
and/or services and can set off this credit against the GST payable
on the supply of goods and services to be made by him. Thus, only
the final consumer bears the GST charged by the last supplier in
the supply chain, with set-off benefits at all the previous stages.
4- No cascading tax: Since, only the value added at each stage is
taxed under GST, there is no tax on tax or cascading of taxes under
GST system. GST does not differentiate between goods and
services and thus, the two are taxed at a single rate.
BENEFITS OF GST
GST is a win-win situation for the entire country. It brings benefits to all
1- Creation of unified the stakeholders of industry, Government and the consumer. It will
national market lower the cost of goods and services, give a boost to the economy and
2- Mitigation of ill make the products and services globally competitive.
effects of cascading 1- Creation of unified national market: GST aims to make India a
3- Elimination of common market with common tax rates and procedures and remove
multiple taxes and the economic barriers thus paving the way for an integrated economy
double taxation at the national level.
4- Boost to ‘Make in 2- Mitigation of ill effects of cascading: By subsuming most of the
India' initiative Central and State taxes into a single tax and by allowing a set- off of Page4

Central Goods & Services Tax Act, 2017