"For A Secured & Wealthier Tomorrow..."

January 2018

7 Financial Decisions You Need To Make Before You Turn 30


It is never too early to plan your personal finances.

So if you are in your 20s or turning 30. It is the right time to make important financial decisions of your life. It is very important to start saving for your future needs at the right time and at the right age. The decisions you take at this stage will impact your financial security later on in your life. 
A financial plan should be followed to build a strong financial base to secure your future. This phase of life is the right time to put in all your efforts to achieve your major financial goals to lead a comfortable life after retirement.

As you grow older day by day, some financial products become more expensive or even few products became inaccessible. Other than this, saving early would ensure you have more number of years to invest and it will compound to many times by the time you retire. There is an old saying that "It is never too late to follow your dreams and there is no time like the present to start."

Here are 7 financial decisions you need to make before you turn 30

1. Save Money For Retirement

Start planning for your retirement when you are in your 20s or at least before you turn 30. You may argue that there is ample time to plan retirement, but as per experts this is the right age to prepare yourself for your retirement (the earlier the better). 

It is good to have enough money at the time of retirement so you do not have to rely on your kids for your expenses. So start investing and put some part of your income every month in a good and suitable retirement plan that will help you reach the target you have set for your retirement.

2. Save Money To Buy A Home

Every one of us would like to own a place we call home. Even if you don’t want to buy a home for several years, you have probably started thinking about how to save for a down payment to buy a home. A down payment for a home makes it easier to qualify for a home loan. 

This is the perfect age, when you are young, energetic and can start saving your money to fulfil your future goals. Saving this money will help you be ready when the time comes and will also give you more purchasing power to find the perfect home of your choice in the area or locality that you want. 

3. Get Insured

Life is uncertain and life insurance can provide financial help to your family when you are no longer around them. Nothing can replace a loved one but advance planning with life insurance can make things easier for those you leave behind. The earlier you buy a life insurance, the lesser the premium amount you have to pay. 

So, secure your family's future today and make life insurance your best friend. And do not stop with just life insurance cover. With rising medical expenses, you also need to buy a health insurance to cover you and your entire family. Health insurance policy provides financial cover to individuals for any unforeseen medical emergencies, be it an illness or an accident that has led to hospitalization.

4. Build An Emergency Fund

Future is uncertain and no one can actually predict the future. So you should set aside at least six months worth of expenses in a separate emergency fund for emergencies. The size of emergency fund varies according to individual needs and circumstances. 

While building an emergency fund, you also need to take into account your existing EMIs and insurance premiums that need to be paid regularly. The habit of building an emergency fund will make your life easy and you can tackle any financial emergencies easily. However you have to make sure that you do not withdraw from this fund unless it is for emergencies.

5. Make Clear Direction Of Your Career

By the time you hit 30, you would have changed a couple of jobs. Your job/work is your financial asset, and the one that generates the income for you. By the age of 30, if you are not well settled in a job/work, you have to do some soul searching. 

You should also know what makes you happy and helps you to generate the income. If you are satisfied, then stick to it and follow a routine investment plan that will help you reach the financial targets you have set for yourself.

6. Save For Your Children’s Education & Marriage

Even if you are single, it is important for you to start planning for children’s education & marriage as early as possible. You should have a rough child investment plan in mind to financially secure your child’s future. Since the cost of education is increasing every day, you need to plan for your children education in your 20s only. Make sure you set a separate investment plan for your children’s marriage.

7. Invest In Yourself

Last but not the least, Investing in yourself is one of the best return on investments you can have. Do not stagnate, but continue to increase your income by investing in yourself. Develop new skills so that you get a promotion in your current job or progress in your running business. Keep learning new techniques and keep your skills sharp. That way you will always justify your promotions and remain valuable to your organization.

Making the right financial decisions in your 20s will take you on the path of financial security. So start from today itself and build a strong financial foundation for your golden future.

Happy Investing!


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Money Saving Tips

Here, when we talk about our own country India, we very well know that most of the people earn money but very few people are able to save money. Saving money is one of the most important tasks in everyone's life as money is the important need for survival in this era.

So we should closely keep watch on our expenses to save our hard earned money. Having a control on your expenses is good for your bank balance and for your peace of mind. It is very important to control small expenses as they make a huge amount when combined together in long time horizon.

Keeping a record of your income and expenses will help you to save more money for your better future. 

The following money saving tips can help you a lot to cut down your expenses and save more money in your account:

Keep record of all your expenses

The thumb rule of saving money is to know where and how much you are spending every day and month. You have to note down every single rupee you spend to examine them at the end of the month. It will take less than five minutes to write down your expenses every day. This way you will identify all your needless expenses. This record will also help you in making your budget for the next month.

Plan monthly budget and stick to it

No, once you got an idea of where and how you are spending in a month. On the basis of this start planning the budget for the next month income and expenses. Also, keep at least 15% to 20% of your income as saving every month. If you are unable to save that much then this is the right time to cut your needless expenses. Making budget not only limit your habit of over-spending but also encourage you to find some ways to earn extra income to increase your savings.

Purchase Planning

Always go shopping with a list and strictly stick with those products only. Wishes are limitless. Avoid buying the things which are not having written in your list. Before going for shopping  out in the market look for online discounts also. Buy some of the regularly used household items in bulk as you will get plenty of discounts on them. This habit of planned purchases will control your spontaneous buying and keep you  with in your budget range.

Goal based saving

You should have some goals for which you are trying to save money. For example, if you are planning to buy a new car in near future or say after three or four years, saving for child's higher education or saving money for your retirement. Person wise goal varies for which money saving should be planned. Setting these types of goals will make it easier to save money for your deaired goal.

Avoid credit cards

Always avoid usage of the credit card for making payments to avoid extra spending. No doubt, Credit cards offer an easy way for the payments while purchasing anything but never be free handed while using it without any worry because use of credit card also encourages buying a non essential item. And, If you are using your credit cards then try to pay your credit card bills every month otherwise you have to pay a higher rate of interest on the balance amount.

Keep control over phone bills

Find a suitable plan for you on the basis of your usage (number of calls made, SMS sent and data used) by reviewing your last few months bills. Post-paid mobile connections always surprises at the end of every month in the form of a long bill like credit cards. Instead use a prepaid mobile connection which will always keep control over your huge mobile bills.

Walk Walk Walk For Your Financial Wealth

Always look for walking opportunities as walking is good for your health. This can save you a healthy amount of money in long time horizon. The prices of autorickshaws, cabs and taxis are very high these days. If you have your own car or bike, then rising fuel hikes affects your pocket. If the distance is within a kilometer it will take only 15 minutes to cover that distance by walking. It will be healthy for you and your pocket. Public transport facility is best options to cut down your monthly expenses on vehicle maintenance and fuel.

Food And Party At Your Home

Once or twice in a month, we use go out for a lunch or dinner on some special occasions and the outside food costs us a lot and at the same time it is not at all healthy and hygienic. Prefer home cooked food rather going out for dinner or lunch at costly restaurants. By eating home cooked food, you can save a lot of money. Organize party at your home so that you can save thousands of rupees.

Save Energy And Reduce Your Electricity Bills

Saving electricity has become the important necessity because of massive electricity bills and rising power cuts. Saving electricity is not a rocket science rather it is easy. With little effort and care in using various home appliances, electronic devices and instruments can help you in cutting your electricity bills down.

Entertainment at home

Find ways to keep the children entertained at home or a home movie instead of opting for theatre now and then. You can also opt for some exhibitions, festival celebrations, sports events, picnicking etc. If you have decided to watch a particular movie then catch that movie on a weekday when you can get tickets at very low price. Also look for one on one free offer or cash back facilities by booking tickets online.

Hope the above-mentioned tips for money saving will help you to cut down your needless and unwanted expenses and help you save more money in your bank accounts.


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Warren Buffett

Warren Buffett is one of the greatest investing and business minds today. But aside from his exponential investing success, Buffett is probably most famous for his humorous insights, colorful commentary, and wise advice.

Buffett's quotes are always entertaining, but some of them provide the perfect insights into how money works and what it really takes to grow wealth.

This collection of quotes represents the best pieces of personal finance advice Warren Buffett has ever given:

Never lose money


Warren Buffett's

Rule No. 1: Never lose money.

Rule No. 2: Never forget rule No. 1.

This rule applies readily to investing if you're working from a loss, it's that much harder to get back to where you started, let alone earn gains.

Get high value at a low price

"Never lose money" is an even smarter rule when paired with another Buffett principle. 

"Price is what you pay; value is what you get." 

Buffett says, Losing money can happen when the price you're paying doesn't match the value you're getting like when you're paying high interest on credit card debt or spending on items you'll rarely use.

Instead, be like Buffett and practice frugality by looking for opportunities to get more value at a lower price. "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down," Buffett wrote.

Form healthy money habits

"Most behavior is habitual," the chains of habit are too light to be felt until they are too heavy to be broken." Habits are changeable, but the earlier you start, the better.

"I think the biggest mistake is not learning the habits of saving properly early, because saving is a habit," Buffett said. 

Pay attention to money habits and work to strengthen those that help your finances, and break those that hurt your finances.

Avoid debt, especially credit card debt

Warren Buffett built his wealth by getting interest to work for him instead of working to pay interest, the way many Americans in debt do. "I've seen more people fail because of liquor and leverage leverage being borrowed money," Buffett said. "You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing."

Buffett is especially wary of credit cards. His advice is to avoid them altogether. "Interest rates are very high on credit cards," Buffett once said in a news release. "Sometimes they are 18%. Sometimes they are 20%. If I borrowed money at 18% or 20%, I'd be broke."

Keep cash on hand

Another key to ensuring security is to always keep cash reserves on hand. "We always maintain at least $20 billion and usually far more in cash equivalents," Buffett said in the 2014 Berkshire Hathaway annual report. Buffett credits these reserves with helping Berkshire Hathaway stay afloat throughout the Great Recession, even as so many other businesses floundered.

Businesses and individuals alike might get an itch to put liquid cash to work through investments. "Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent," Buffett said. "When bills come due, only cash is legal tender," he continued. "Don't leave home without it."

Invest in yourself

"Invest in as much of yourself as you can. You are your own biggest asset by far," Buffett said. He echoed those sentiments in a CNBC interview when he said, "Anything you do to improve your own talents and make yourself more valuable will get paid off in terms of appropriate real purchasing power."

Those returns are big, too. "Anything you invest in yourself, you get back tenfold," Buffett said. And unlike other assets and investments, "nobody can tax it away; they can't steal it from you."

Learn about money

Part of investing in yourself should be learning more about managing money. As an investor,Warren Buffett surely finds that much of his job is limiting exposure and minimizing risk. And "risk comes from not knowing what you're doing," Buffett once said. The more you know about personal finance, the more security you'll have as you minimize risks.

The lesson from this Buffett quote, then, is to actively educate yourself about personal finance. As Buffett's partner, Charlie Munger, put it, "Go to bed smarter than when you woke up." Buffett's formula for this is simple: Read a lot. "That's how knowledge builds up, like compound interest," he said.

Trust a low-cost index fund for your portfolio

While much of Buffett's wisdom and advice borders on the philosophical, he has also provided some actionable tips that nearly anyone could apply. For the average investor, for instance, Buffett likes index funds. "Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund," he wrote in his 2013 letter to Berkshire Hathaway shareholders.

This is advice Buffett has given for years. "If you invested in a very low-cost index fund where you don't put the money in at one time but average in over 10 years you'll do better than 90% of people who start investing at the same time," Buffett said at the 2004 Berkshire Hathaway annual meeting.

Give back

"If you're in the luckiest 1% of humanity, you owe it to the rest of humanity to think about the other 99%," Buffett said. And as a top member of that 1% himself, Buffett makes it a point to put his money where his mouth is.

Buffett donated $2.8 billion in Berkshire Hathaway stock to five charities. He is also a founder of The Giving Pledge along with Bill Gates which is a promise that more than 130 billionaires so far have made to give their fortunes away. While you might not be a billionaire, you can still enrich your life and others' by giving back.

View money as a long-term game

"Someone's sitting in the shade today because someone planted a tree a long time ago," Buffett once said and it's true. 

Planting and nurturing the seeds of financial success now will lead to shade to enjoy later in life, like freedom from debts, a secure retirement, or the ability to cover college costs for your children.

Such a long-term view of money is central to Buffett's investing decisions. He once said, people should "invest with a multi-decade horizon." Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime," rather than on moments of stock market volatility or economic crisis.

Building true wealth and financial security takes time, and you'll likely encounter financial challenges along the way. Sometimes they're avoidable; sometimes they're not. But viewing your finances and a lifelong endeavor can help you stay on course despite those hardships and give you a financial foundation that will last. Just make sure you're keeping these valuable money lessons from Warren Buffett in mind.

Happy Investing!


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Save And Invest

Every month, most of us earn an income. Be it in the form of a salary or business income. After excluding all the necessary as well as unplanned expenses, what ever is left behind is called the money which we have remained in our hand. Now, here comes the most important part of personal finance: Should I save or invest this remaining sum of money left in my hand? 


A very well known Investor Mr. Warren Buffet has nicely given the advice for 'Saving' as:



"Don't save what is left after spending; spend what is left after saving."

And, after following this step comes the most important factor called 'Investing'.

Here, I have tried to clear in very easy language the most important difference in the field of personal finance.

The basic differences between savings and investment are explained in the following points:
  • Savings means to set aside a part of your income for future use. Investment is defined as the act of putting funds into productive uses, i.e. investing in such investment vehicles which can reap money over time.
  • People save money, to fulfill their unexpected expenses or urgent money requirements. Conversely, investments are made to generate returns over the period that can help in capital formation.
  • With an investment, there is always a risk of losing money. Unlike savings, where there is no or comparatively fewer chances of losing the hard-earned money.
  • Undoubtedly, the investment provides higher returns than savings, as there is a nominal rate of interest on savings. However, the investments can earn money more than the invested amount, if invested wisely.
  • You can have access to your savings, anytime because they are highly liquid, but in the case of investment you cannot have easy access to money because the process of selling the investments takes some time.
Conclusion:

Savings, alone is not enough to the increase your wealth, because it can only accumulate funds. There must be investment of your savings into productive investment tools. There are number of limitless options to invest your earnings. Although risk and returns are always associated with it, but when there is no risk, there is no profit.

As the excess of everything is bad, so as in the case of saving and investment, i.e. it is important for an economy that the savings and investment should be done in the correct proportion. The excess of savings over investment will lead to unemployment, and if it is revered, then inflation may occur.

So now what are you going to opt? Savings or Investment?

Happy Investing!



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Benefits Of Mutual Funds

It is most commonly asked question in India, Why should I invest in Mutual Funds? It is very risky! It is subjected to market riskd! It is Share Market! It is Gambling!

So for all of you out there who are not clear about this golden investment tool available in India, I am sharing the positive points of Mutual Funds.

Here are the benefits of investing in mutual funds.

Investing in Mutual Funds Is Very Easy:

Putting together a portfolio of stocks and bonds can be difficult, if not impossible, for the average investor. For example, the time and knowledge required to research and analyze a dozen or more stocks can be too challenging for most people. That's not to mention all the trades needed to build the portfolio, plus the ongoing research and analysis required to maintain the portfolio. But when it comes to investing in mutual funds, investors can get started investing with just one mutual fund.

Once you know your investment objective, which will include the number of years to invest and how much risk you're willing to take, you can choose the best mutual fund or funds for you. And depending upon the types of mutual funds you use, the ongoing maintenance required may be little to nothing.

Mutual Funds Offer Professional Management:

One of the primary reasons investing mutual funds is easy is because they're professionally managed. Rather than researching, analyzing, buying and selling stocks or bonds yourself, you have a skilled fund manager doing it for you. Professional management is at the core of how mutual funds works: When investors buy shares of mutual funds, they're pooling their money together.

Managers use this pool of money to buy the stocks or bond securities that end up forming one portfolio.

Think of mutual funds as investment baskets of securities. Each basket has its own objective and manager (or management team). The manager also has a team of analysts that assist in doing the research. Also keep in mind that, when it comes to management, mutual funds fall into two primary categories - one is active management and the other is passive management.

Managers of actively-managed funds will use their resources to try and "beat the market," which is to say that they'll attempt to outperform a certain benchmark, such as the S&P BSE 200 or Nifty index. However, the manager of a passively-managed mutual fund will not try to beat the index but will instead buy and hold a basket of stocks that will replicate the holdings and performance of the index.

Mutual Funds Are Well Diversified Investments:

The nature of mutual funds as pooled investments that are professionally managed means that investors generally can easily accomplish one of the most important standards of smart investing diversification. To diversify means to spread market risk by holding a variety of several different securities, rather than just a few.

Most mutual funds invest in dozens or hundreds of stocks or bonds within one portfolio.
Depending upon the type of fund, this accomplishes the fundamentals of diversification with as little as one or two mutual funds. However, when building a portfolio of mutual funds, especially as investment assets and objectives grow more complex over time, investors are smart to diversify across several funds in different categories.

The reason why diversification is important is that investing in just one or two securities can be too risky. For example, if an investor buys just a few stocks and those stocks see significant declines in price over a short period of time, the investor's portfolio can drop dramatically in value. But if the investor buys a mutual fund that holds 100 stocks, and a few of those stocks see price declines, the impact on the investor's account value is less.

Investment Costs Are Low for Mutual Funds:

Investors tend to overlook many aspects of building and managing a portfolio, and the most negative impact of those overlooked items often comes from expenses. Depending upon the brokerage firm or investment company, investors may be charged commissions for each purchase or sale of single securities, such as stocks. This can add up to thousands of rupees per year, per account, depending upon the frequency and size of trades.

However mutual funds can be significantly less expensive. A mutual fund manager will place all the necessary trades to maintain the mutual fund portfolio but the investor may only be responsible for one low expense. But if investors are not careful, investing in mutual funds can be more expensive than buying individual stock securities. To keep costs low, mutual fund investors are wise to buy no-load mutual funds with low expense ratios.

Investors Can Buy Many Different Types of Mutual Funds:

Investment objectives are unique to every investor, which means that there are many different reasons to buy mutual funds. Fortunately, there are several categories of funds that can suit any investment need. Some of the most common investment objectives include retirement and education, each of which may require different funds to suit the needs of the investor.

Retirement is generally considered a long-term investment objective. But there are mutual fund types, such as money market funds or bond funds, that are suitable for most short-term needs. Investors may also combine types of funds to tailor more specific investment objectives.

Mutual Funds Are Versatile Enough to be Used By All Types of Investors:

All of the advantages of mutual funds mentioned in this article combine into one advantage of flexibility. They're simple enough to be understood and used by beginners but versatile enough to be used by professional money managers, who often use them to build portfolios for clients.

A beginning investor may buy their first mutual fund to start saving for retirement, while a large investment firm might use the same mutual fund in a portfolio of funds for a major client, such as a wealthy trust client or an endowment fund used by a major university or non-profit organization.

Divisibility:

Many investors don't have the exact sums of money to buy round lots of securities. One or two lac rupees is usually not enough to buy a round lot of a stock, especially after deducting commissions. Investors can purchase mutual funds in smaller denominations, minimum at Rs. 500. Smaller denominations of mutual funds provide mutual fund investors the ability to make periodic investments through monthly purchase plans while taking advantage of rupee-cost averaging. So, rather than having to wait until you have enough money to buy higher-cost investments, you can get in right away with mutual funds. This provides an additional advantage liquidity.

Liquidity:

Another advantage of mutual funds is the ability to get in and out with relative ease. In general, you are able to sell your mutual funds in a short period of time without there being much difference between the sale price and the most current market value. However, it is important to watch out for any fees associated with selling, including exit load fees. Also, unlike stocks and exchange-traded funds (ETFs), which trade any time during market hours, mutual funds transact only once per day after the fund's net asset value (NAV) is calculated.

There's no doubt that mutual funds will stay for many more years and decades to come. With Crores of Rupees invested in mutual funds in the India alone, and popularity increasing in emerging markets, there's no reason to expect this versatile investment type will do anything but gain in popularity in the future.


Investing in mutual funds can be a smart move for almost any kind of investor. Beginning investors and professional money managers, and every experience degree of investor in between, can take advantage of the features and benefits of mutual funds and apply them to their investment objectives.

There are many qualities of mutual funds to learn but fortunately investing in them is much easier than making a list of the advantages!

Happy Investing!


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GST India

What is GST?

Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

In simple words, Goods and Service Tax is an indirect tax levied on the supply of goods and services. GST Law has replaced many indirect tax laws that previously existed in India.

GST is one indirect tax for the entire country.

Under GST, the tax will be levied at every point of sale. In case of interstate sales, Central GST and State GST will be charged. Intra-state sales will be chargeable to Integrated GST.

Now let us try to understand the definition of Goods and Service Tax – “GST is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.”

Multi-stage

There are multiple change-of-hands an item goes through along its supply chain: from manufacture to final sale to the consumer.

Let us consider the following case:
  • Purchase of raw materials
  • Production or manufacture
  • Warehousing of finished goods
  • Sale to wholesaler
  • Sale of the product to the retailer
  • Sale to the end consumer
Goods and Services Tax will be levied on each of these stages, which makes it a multi-stage tax.

Value Addition

The manufacturer who makes biscuits buys flour, sugar and other material. The value of the inputs increases when the sugar and flour are mixed and baked into biscuits.

The manufacturer then sells the biscuits to the warehousing agent who packs large quantities of biscuits and labels it. That is another addition of value after which the warehouse sells it to the retailer.

The retailer packages the biscuits in smaller quantities and invests in the marketing of the biscuits thus increasing its value.

GST will be levied on these value additions i.e. the monetary worth added at each stage to achieve the final sale to the end customer.

Destination-Based

Consider goods manufactured in Maharashtra and are sold to the final consumer in Karnataka. Since Goods & Service Tax (GST) is levied at the point of consumption, in this case, Karnataka, the entire tax revenue will go to Karnataka and not Maharashtra.

Journey of GST in India

The GST journey began in the year 2000 when a committee was set up to draft GST Law. It took 17 years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017 the GST Law came into force.

Advantages Of GST

GST will mainly remove the Cascading effect on the sale of goods and services. Removal of cascading effect will directly impact the cost of goods. The cost of goods should decrease since tax on tax is eliminated in the GST regime.

GST is also mainly technologically driven. All activities like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal. This will speed up the processes.

What are the components of GST?

There are 3 taxes applicable under GST: CGST, SGST & IGST.

CGST: Collected by the Central Government on an intra-state sale (Eg: Within Maharashtra)

SGST: Collected by the State Government on an intra-state sale (Eg: Within Mahaashtra)

IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)

Illustration: 

Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The GST rate is 18% comprising of only IGST.

In such case, the dealer has to charge Rs. 9,000 as IGST. This IGST revenue will go to the Central Government.

The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on the good is 12%. This rate comprises of  CGST at 6% and SGST at 6%.

The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the Central Government and Rs. 3,000 will go to the Gujarat government as the sale is within the state.

Tax Laws before GST

In the pre-GST regime, there were many indirect taxes levied by both state and center. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Interstate sale of goods was taxed by the Center. CST (Central State Tax) was applicable in case of interstate sale of goods.  Other than above there were many indirect taxes like entertainment tax, octroi and local tax that was levied by state and center.

This lead to a lot of overlapping of taxes levied by both state and center.

For example, when goods were manufactured and sold Excise Duty charged by the center was charged by the center. Over and above Excise Duty, VAT was also charged by the State. This lead to a tax on tax also known as cascading effect of taxes.

The following is the list of indirect taxes in the pre-GST regime:
  • Central Excise Duty
  • Duties of Excise
  • Additional Duties of Excise
  • Additional Duties of Customs
  • Special Additional Duty of Customs
  • Cess
  • State VAT
  • Central Sales Tax
  • Purchase Tax
  • Luxury Tax
  • Entertainment Tax
  • Entry Tax
  • Taxes on advertisements
  • Taxes on lotteries, betting, and gambling
All these taxes have been replaced with Central GST, State GST, and Integrated GST.

What changes has GST brought in?

In the pre-GST regime, tax on tax was calculated and paid by every purchaser including the final consumer. This tax on tax is called Cascading Effect of Taxes.

GST avoids this cascading effect as the tax is calculated only on the value-add at each stage of transfer of ownership.

GST will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate.

Along the way, the tax liability was passed on at every stage of the transaction and the final liability comes to rest with the customer. This is called the Cascading Effect of Taxes where a tax is paid on tax and the value of the item keeps increasing every time this happens.

In the case of Goods and Services Tax, there is a way to claim credit for tax paid in acquiring input. What happens in this case is, the individual who has paid a tax already can claim credit for this tax when he submits his taxes.

In the end, every time an individual is able to claim input tax credit, the sale price is reduced and the cost price for the buyer is reduced because of a lower tax liability. The final value of the biscuits is therefore reduced from Rs. 2,244 to Rs. 1,980, thus reducing the tax burden on the final customer.


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