Significant Advantages and Disadvantages of GST in India.
- Yogesh Suthar
- Jul 1, 2020
- 3 min read
GST stands for Goods and Services Tax which will be levied on the supply of goods or services or both in India.
Goods and Services Tax was launched all overIndia with effect from 1 July 2017. The Jammu and Kashmir state legislature passed its GST act on 7 July 2017
The Goods and Service Tax (GST) regime, which has been the biggest tax reform for indirect taxation in Independent India, completes three years on July 1, 2020. GST was rolled out on July 1, 2017, at a glittering ceremony held in the Central Hall of Parliament on the midnight of June 30, 2017.
It was aimed at subsuming multiple central and state taxes into one tax, into a “One Nation One Tax" and facilitating the ease of doing business.
The introduction of GST has been a game-changer for the Indian economy. This transformational law has integrated India into a single, common market by replacing the various indirect taxes, including central excise duty, services tax, additional customs duty, surcharges, state-level value-added tax, and octroi, into a simple, transparent and technology-driven tax regime.
GST is a destination-based tax on the consumption of goods and services. It is levied at all stages, right from manufacturing to final consumption.
Advantages of GST
Reduction in Corruption and Tax Evasion
Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
Less tax compliance and a simplified tax policy compared to the current tax structure.
Removal of cascading effect of taxes i.e. removes tax on tax.
Reduction of manufacturing costs due to the lower burden of taxes on the manufacturing sector. Hence prices of consumer goods will be likely to come down.
Lower the burden on the common man i.e. public will have to shed less money to buy the same products that were costly earlier.
Increased demand and consumption of goods.
Increased demand will lead to an increase in supply. Hence, this will ultimately lead to a rise in the production of goods.
Control of black money circulation as the system normally followed by traders and shopkeepers will be put to a mandatory check.
Boost to the Indian economy in the long run.
Invoice matching concepts.
Higher threshold for registration
Composition scheme for small businesses etc
Benefits for the Consumer
Transparency:
The complexity of the VAT indirect tax structure prevents transparency. GST being a uniform tax system, it would yield the necessary information to the end consumers and help create a transparent environment.
Overall tax relief & reduced Cost:
The VAT system had many complications, which have a cumulative effect on the pricing for the end consumer. Multiple indirect taxes collected at all progressive stages of the value chain in the VAT system lead to an increase in the prices of all commodities
Benefits for the Central and State Governments
Ease of administration:
Multiple indirect taxes at central and state levels, lead to a lot of complications and confusion, making it difficult to administer. Due to a strong and uncomplicated IT system, the administration of indirect tax under GST is much simpler.
Increased tax compliance:
There is an inbuilt mechanism in the design of GST that incentivizes traders who comply with taxes, transferring input tax credit through the value chain. This, along with a robust IT infrastructure is expected to result in better tax compliance etc..
Disadvantages of GST
Challenging for Smaller Businesses:
When it comes to GST, everything from registration to return filing and payment is now online. This is against the previous indirect tax regime where taxpayers were used to the paperwork. Thus, an online system could be difficult to adopt by small taxpayers.
Increased Cost for Businesses:
As we have already established that GST is changing the way how tax is paid, businesses will now have to employ tax professionals to be GST-complaint. This will gradually increase costs for small businesses as they will have to bear the additional cost of hiring experts.
Also, businesses will need to train their employees in GST compliance, further increasing their overhead expenses.
GST came into effect in the middle of the financial year.
GST was introduced on July 1, 2017, in the middle of the financial year 2017. This created difficulty on the part of businesses to shift to a new tax regime immediately.
DISCLAIMER :
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Yogesh Suthar is not liable for any decision arising out of the use of this information.Have You Read This?
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