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A Simple Instance Of How The GST Regime Operates

A Simple Instance Of How The GST Regime Operates, The pre-GST regime of Indirect Taxation in India was characterized by a lot of red tape and complexity

Published

2 years ago

December 17, 2019

TwinzTech

A Simple Instance Of How The GST Regime Operates

The GST regime has been a game-changer in the sphere of Indirect Taxation in India. The pre-GST regime of Indirect Taxation in India was characterized by a lot of red tape and complexity.

There was a multitude of taxes and cesses which were in operation and had to be taken care of in a haphazard and disconnected manner by businesses. The actual rate of taxes on many products was almost impossible to determine for the average consumer, which was terrible for transparency.

How GST Regime Works

With the introduction of the GST system, all of those taxes were subsumed under the Goods and Services Tax, with a few exceptions. This drastically cut the number of taxes that businesses and consumers had to keep track of.

The Goods and Services Tax also was a game-changer in the field of Information Technology concerning taxation. Previously, there was almost no way for the Government to track down all of the transactions and invoices which were generated throughout business every day.

But, with the introduction of the GST, the entire system has now migrated online, so a GST invoice is now online and easily trackable by both the Government, as well as the business on the GST portal, which runs on the GSTN (Goods and Services Tax Network). This has increased transparency and compliance.

The GST is a comprehensive indirect tax affecting almost all goods and services in India, barring few items which have been kept outside the purview of the tax. It has several features which are illustrated below:

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1.Basic Overview:

The GST, as mentioned above, is a comprehensive tax, a single tax that has subsumed almost all of the taxes and cesses operating under the previous tax regime. GST was created to simplify procedures and create a transparent system of Indirect Taxation.

To this end, the GSTN Information Technology network was created to make the entire system online. Various forms need to be filled by businesses that are dependant on the type of business and turnover.

Unlike the pre-GST regime, a GST invoice generated in the course of business needs to be uploaded onto the GSTN network by both the supplier and the dealer who purchases the goods to be sold to the consumer. This ensures compliance.

2.Controlling Body:

How GST Regime Works

The GST system is controlled by a unified body called the GST Council. This body monitors the GST to ensure everything works smoothly. From time to time, the council publishes revisions to the tax structure when it feels that certain elements need to be revised. This is usually done in response to market conditions or anticipation of future market conditions.

3.GST Structure:

The GST is structured into slabs. There are four underlying slabs under the GST regime. On top of that, there is a fifth slab, which is essentially an exempted item slab, which includes items that have no GST attached to them.

The 4 major slabs are :5%, 12%, 18%, and 28%. Everyday items are placed in the lower slabs while sin goods and luxury items fall under the highest 28% slab. Some examples of items within the various slabs include vegetables, milk, honey, bread, etc. under the exempt category.

Items like apparel costing less than INR 1000, frozen vegetables, coffee, tea, etc. under the 5% category. Frozen meat, butter, cheese, ghee, etc. under the 12% category. Cakes, pasta, biscuits, mineral water, etc. under the 18% category. Things like pan masala, aerated drinks, aftershave, etc., fall under the highest 28% category.

This list keeps on changing, and for the latest information, official records are available with the current GST rates in effect.

4.Forms:

As briefly mentioned above, there are various forms under the GST system which need to be filled when filing returns. The dates in which those forms are due are also published on the official GST council website.

The current forms need to be filed range from GSTR-1, which details all outward supplies of goods and services, GSTR-2, which describes all of the inward supplies of products and services right through GSTR-9, which is the annual return to be filed by registered taxpayers. The GST council website has detailed FAQs regarding the filing of the forms.

The GST forms will be changing from April of 2020, and many of the ways will be done away with in favor of new forms, so businesses must keep track of the changes being announced by the GST council.

Conclusion:

The GST regime was created to ensure tax compliance as well as tax transparency in the Indian economy. By employing digital tax returns and online GST invoice processes, the Government has tried to create a simplified tax regime to replace the complicated old one.

There are many more aspects of GST that can be reviewed online on the official website as well as other websites containing updated information.

Blockchain

Can Tokenization of Asset Bring More Investment From the Masses

Tokenization of assets isn’t a new phenomenon, but unlike the waves in the past STOs, this time, it might tip the balance in favour of decentralized finance.

Published

29 mins ago

June 25, 2021

TwinzTech

In a new article, Coindesk has predicted that the Cryptocurrency’s DeFi sector is set to see a resurgence of Security Token Offerings (STOs) and has predicted “a sixfold increase in the total dollars raised using such funding methods over the next four years.”

Tokenization of assets isn’t a new phenomenon, but unlike the waves in the past STOs, this time, it might tip the balance in favour of decentralized finance. The article further predicted that “more private companies will bypass traditional initial public offerings (IPO) and instead use blockchain technology to digitize the capital-raising process.”

Although traditional capital markets and venture capital firms have ceded some prime money-making to DeFi, doing away with conventional IPOs might be a significant first step to democratizing venture financing.

Past the debacle of early blockchain ICOs, where the process by which a company ICOs was easy, but the lack of related regulations within the US and abroad around ICOs had led to many fraudulent crowd sales, illegal airdrops, and outright scams. This, in turn, had tarnished the reputation of blockchain-based projects. However, tokenizing assets and either fiat-backed or cryptocurrency backed by gold and silver have dramatically increased confidence in the crypto-asset markets.

The tokenization of assets that represents a real tradable asset, in reality, is quite similar to the process of securitization. An STO, with increasing frequency, is also used to describe a share in a company, ownership of a piece of real estate, or participation in an investment fund. These security tokens are also tradeable on secondary markets.

The new token economy offers to open up the investment world making it more transparent, efficient, and fair. The simplicity of tokenization will also help in reducing the friction surrounding the creation, purchase, and sale of securities.

In addition, it will bring several advantages for both buyers and sellers that will include:

Table of Contents

1. Increased Liquidity of the Market:

The tokenization of illiquid assets in private hands, specifically art, real estate, and the likes, will significantly boost the market’s liquidity. Not only will it make it possible to liquidate the illiquid assets partially, but the ability to trade the security tokens in the secondary markets will also increase the trading activity bringing with it a broader base of traders and investors.

The “liquidity premium” alone makes it worthwhile to tokenize illiquid assets capturing more excellent value for the underlying assets.

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2. Making Transactions Faster and Cheaper:

The intelligent contracts attached with the tokens and their automated execution upon the meeting of coded terms in the smart contract will mean automation and lack of administration of much cheaper transactions. The buying and selling of the security tokens will require lesser intermediaries, faster deal execution and lower transactional fees.

3. Increased Transparency:

Since a security token is also essentially a smart contract, it can be embedded with the owner’s responsibility and rights. The fact that records on a blockchain are immutable searches, provenance and trading history would be a cinch. The entire chain of ownership rights, responsibility, and origin of the security token will be entirely transparent.

4. Greater Accessibility:

Most importantly, tokenization could open up the investment world to a large audience. The high liquidity, market movement, lower investment amounts, and shorter periods required to hold the token can make the token economy to the average investor. Like the ticket divides an illiquid asset, the tokens themselves are readily divisible into smaller and smaller fractions enabling even a small investor to participate in the token economy.

With automated workflows and cheaper and cheaper processing costs, and token administration, the minimum investment amounts will fall further. This will also increase liquidity allowing investors to hold the investments for shorter periods before cashing in. The trading is made even more robust due to secondary markets that operate 24/7.

5. Easier Asset Conversion:

With the DeFi market making the conversion of crypto assets into fiat currency more readily available, the same will become true for security tokens. By providing greater liquidity to an average investor that often shies away from investment into illiquid assets due to fear of the lengthy process of conversion of an illiquid asset into a liquid one.

If anything, the strong emergence and success of the DeFi market have shown us that making finance decentralized, transparent, and easily accessible will bring in more investors, not less, and lead to the market’s democratization.

In conclusion, the advent of a token economy will lead to a more transparent, liquid, accessible, and just financial and investment system that will serve more and more people via financial products and investment opportunities for all.