Abolition of Research Development Cess under GST

India's Goods and Services Tax (GST) is a significant tax reform that has brought about a tremendous change in the country's indirect taxation system. GST was introduced with the aim of streamlining the country's indirect tax system and eliminating the cascading effect of taxes. One of the significant issues that small and medium-sized enterprises faced before the introduction of GST was the taxation on Research and Development (R) activities.

Before GST, R Cess used to be charged at the rate of 5% on all imported products and services. Additionally, the excise duty was also applicable to these products and services, leading to a cascading effect of taxes. However, with the introduction of GST, R Cess has been abolished. This has led to a considerable relief to businesses conducting R activities as they are no longer required to pay an additional tax on top of the GST.

Impact of Abolition of R Cess under GST

The abolition of R Cess under GST has resulted in several benefits for businesses, especially small and medium-sized enterprises. Some of the significant impacts are:

Reduced Costs of R Activities

The abolition of R Cess has led to a reduction in the overall cost of conducting R activities. Earlier, businesses had to pay an additional 5% tax on top of the existing taxes, leading to an increase in the overall cost. However, with the abolition of R Cess, businesses can now conduct R activities at a lower cost.

Increased Investment in R Activities

With the reduction in the cost of conducting R activities, businesses are now more inclined to invest in R This has led to an increase in innovation and the development of new products and services. Additionally, an increase in R activities has also led to the development of new technologies and methodologies, thereby benefitting the entire industry.

Improved Competitiveness of Indian Businesses

The reduction in the cost of conducting R activities has also improved the competitiveness of Indian businesses. With the development of new products and services, businesses can now compete effectively with foreign competitors. Additionally, the development of new technologies and methodologies has also led to an improvement in the quality of products and services, making them more competitive in the global market.

Conclusion

The abolition of R Cess under GST has been a significant step towards improving the ease of doing business in India. The reduction in the cost of conducting R activities has led to an increase in investment in R, which has resulted in the development of new products and services. Additionally, the development of new technologies and methodologies has also improved the competitiveness of Indian businesses in the global market. It is expected that these benefits will continue to accrue in the future, leading to the overall growth and development of the Indian economy.