Cascading Effect
The cascading effect in taxation refers to a situation where tax is levied on top of a tax. Under the old tax system in India, taxes were applied at every stage of production and distribution without allowing credit for the tax paid at earlier stages. This led to a situation where a product was taxed multiple times, resulting in higher prices for consumers.
With the introduction of Goods and Services Tax (GST), the cascading effect has been eliminated. GST allows for the input tax credit, meaning businesses can claim credit for the tax they've already paid on inputs. This ensures that tax is only applied to the value added at each stage of the supply chain, reducing the overall tax burden and preventing double taxation.
By CA L.Muralidharan and CPA L.Mukundan
Visit www.sreeramcoachingpoint.com for more blogs & www.lmgcute.com
Contact: 6383228202 or 9884439769
Also download our app Gyanji for more utility and benefits
Best place of coaching for CPA, CMA USA & CA
