The most important reason for the implement GST is to avoid the cascading effect on tax. In the current system a product on which excise duty has already been paid can also be liable for VAT. Suppose a product named A is manufactured in a factory. As soon as it is released from factory, the excise duty has to be paid to the Central Government. When Product A is sold in the same state then the VAT has to be paid to the state government. Also the credit on the excise duty paid can’t be taken against the output VAT. This is known as cascading effect since tax is levied for more than once on same product.
The GST will be implemented to build a common market across the states, not just to avoid the effect of indirect tax but also to improve the tax compliance.
GST will lead a more transparent and neutral method to raise revenue.
In GST price reduction as credit of input tax is available against output tax.
It is a very simplified and cost effective system as the procedural cost decreases due to the similar accounting for all types of taxes which are CGST, SGST, IGST.
GST is structured to simplify the current indirect system of cascading taxes. It is a long term strategy leading to a higher output, more employment opportunities, and an economic boom.
GST is beneficial for both the economy and corporations across the country. The reduced tax burden on companies will reduce the production cost making exporters more competitive.