\The Goods and Services Tax (GST) framework is a new form of indirect taxes launched by the Government of India on 1 July 2017. It is often seen as a groundbreaking overhaul of the indirect tax structure of the nation with the goal of optimizing the tax structure as well as guaranteeing ease of service and accountability. Enforced with the principle of ‘one country, one tax,’ the GST regime replaces the cascading impacts of various indirect taxes, like Excise Duty, VAT, & Service Tax imposed by the state & nation government on the distribution system of products and services in India. It’s been planned with the goal of effectively reducing the financial burden on India’s tax-paying citizens.
Advantages And Disadvantages Of GST
The Goods and Services Tax was initiated with the main goal of growing the economy of India. In addition to streamlining the indirect tax structure, GST has helped to eliminate hidden costs for products/services, thus benefiting end-users. Here are some of the advantages of GST
Compliance Is Easier
The usage of the GST framework has cleared route for easier systems and compliances just as helped in simply observing and following of defaults or non-compliances. Moreover, there had been various legitimate compliances under various governing bodies. However, presently, citizens have things simpler as lawful standards just under one umbrella should be followed. GST is upheld by the Goods and Service Tax Network (GSTN), a completely incorporated tax stage, to help deal with all things regarding GST.
Classification Is Simpler
The GST system has enabled the creation of a progressive system for easier categorization of services and products. Nevertheless, the tax under the GST is built on the notion of distribution rather than on that categorization. That is, if the trade does not come within the limits of the distribution, it would not be taxable as per the GST.
Promotes Healthy Competition
In compliance with global tax norms, the adoption of the GST program has ensured a decline in the total cost of manufacturing, rendering Indian exports even more affordable on the international economy. In fact, inflation is expected to stay under check under the GST system.
While the different facets of the GST system tend to be beneficial in general, there are other factors that can be called slight disadvantages.
Operational Costs Increase
GST has changed the way taxes are charged. In addition, to facilitate compliance, companies are expected to focus on the services of qualified GST consultants. This also resulted in higher expenses for smaller companies to employ GST contractors, resulting in running costs.
Maybe Burdensome On SMEs
Smaller business institutions, particularly in the manufacturing industry, are confronted with some of the difficulties of the GST program. Previously, those with a revenue of Rs 1.5 crore would have to bear excise duty. Nevertheless, any company with revenue above Rs 20 lakh is now expected to pay GST. Small and medium-sized companies with a revenue of up to Rs 75 lakh do have the right to select a composition scheme and pay just 1% turnover tax instead of GST and face lower compliance. However, the only thing that may concern small and medium-sized businesses is that they might not be eligible to claim an input tax credit. The choice to choose among increased taxes or a composition arrangement (resulting in no right to an input tax credit) is also challenging.
Increased Cost Of Implementation
The cumulative method of maintaining compliance with the GST Act and tax returns have contributed to an improvement in the cost of enforcement for companies. Its expense refers to spending or investment in services such as equipment, accounting (GST), applications, or preparation programs for GST experts. In fact, the average cost of doing business rose in the first few months of the introduction of the GST.
Certain Products Are Not Covered Under The GST Act
Some commodities such as petroleum products, oil, and gasoline do not fall under the range of the GST. It is seen as a significant drawback for oil producers who are not able to gain input tax credit for petroleum goods because they are not paid under the GST.