Manufacturing could be considered as the backbone of a country’s economy as it helps businesses grow better. For example, manufacturing helps in modernising agriculture which increases agricultural productivity. It also helps reduce poverty as well as unemployment. The development of manufacturing sector is indeed needed to minimise regional disparities. It means that if manufacturing sector shows slow progress, this could lead to a very competitive trade-in business locally, nationally, and globally.
A report by IBEF showed that in India, leveraging and focusing in manufacturing sectors has helped its country build more job openings to its citizens. IBEF reported that on a statistical level, GDP share of manufacturing sector is expected to surge to 25 percent by 2022 along with 100 million jobs by 2022.
Unfortunately, focusing on manufacturing might not bring all the advantages for small businesses. IBEF reported that manufacturing has also created much chaos. It is under-utilisation of resources to surpass growth. One of the biggest challenges is the complicated and haranguing tax structure it brings. When manufacturing runs well in a country, there will be a tax rise for business. A company needs to pay taxes for each employee they hire. Thus, it will be burdensome for small or new businesses.
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However, business leaders today can breathe more freely as there is a tax policy called GST (Goods and Services Tax). Although it might not be a one-size-fits-all solution, GST implementation can help its stakeholders by staying away from problems. Other than that, in what aspects GST can benefits manufacturing industry? According to Master India, here are some benefits of GST for industries, especially for manufacturing.
GST reduces the cost of production
While businesses need to pay double tax for every production such as excise duty and VAT due to different taxable events, GST only needs a single taxable event. Owing to this, goods are expected to get cheaper with more sales and lending concerned stakeholders a stronghold in an increasingly competitive market.
GST can simplified taxes
GST provides a more efficient and effortless transaction-based valuation which will be easier to calculate than the old tax structure.
GST can bring less cost and better quality of goods and services
A key driving of production costs which was not available in taxes will not be available. It can reduce the burden on manufacturing sector and setting up a steady flow of credit. Additionally, manufacturing sector can now focus more on quality aspect of production process rather than commercials which can solve the quality gaps in a country that needs an up-gradation of goods production.
GST can restructure and streamline supply chain
Under the concept of GST, businesses are only required to re-engineer their supply chain. While before, they should depend on taxes operating in different states. This, in turn, can benefit business as they can focus more on optimising business efficiency and operability.
GST requires no assessment by multiple tax authorities
An ordinary tax assessment will require more effort to get it done. However, GST will make it simple by carrying out in defined a three-fold system. It will result in a more efficient tax assessment. It will also aid manufacturers in dealing with the procedure without having to deal with a multiplicity of tax-related queries.
GST allows a business to only registration as per state
Earlier before GST, businesses are required to obtain a separate registration for each factory in every state. In a GST regime, a single taxable manufacturer will only require a business to apply once for every factory they own. It means there will be less paperwork and bureaucratic intervention to deal with.
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