Indian government passed the revolutionary single indirect tax called GST three years ago with the hope that it will boost the country’s economy in the long run. In these three years, there has been a lot of controversies on this new type of indirect tax.
While Some people criticized it because of the refund delays, some supported the tax because it allowed them to expand their business anywhere in the country.
Though there has been a mixed response on GST in the country, Nirmala Sitharaman, the head of the gst council has claimed many times that it will help everyone in the long run.
What is GST?
GST is the single indirect tax that has replaced many indirect taxes in India. It is an important move by the Indian government to boost the Indian economy. There are mainly four components of GST named as cgst, SGST, IGST, and UTGST. Goods and service tax is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
Advantages of Goods And Service Tax (GST)
Elimination of the cascading effect of tax
One of the most significant benefits of GST is that it removes the cascading effect of the tax. This single indirect tax has eliminated taxes like excise, octroi, sales tax, Service tax, turnover tax, etc. It has made the process of taxation a little more convenient as businesses do not have to pay multiple taxes in their revenue cycle.
Simple and Easy Online Process
One of the best features of goods and service tax is its online process. The entire procedure can be done online on the official website. It saves a lot of time and effort as you don’t need to run from pillar to post to collect and process different documents.
Higher Threshold Limit For GST Registration
Before the implementation of GST in the country, any business with a turn over of Rs 5 lakh was liable to pay a value-added tax (VAT). It was criticized by many SMEs as this tax was restricting them to expand their business.
However, under the GST regime, this threshold limit has been increased to Rs 20 lakh, which gives a lot of small traders a breathing space.
Less Number Of Compliance And Returns
Before the implementation of GST, businesses used to pay VAT and service tax to the government. They had their own multiple returns and compliances. The whole process of filing returns was too complicated and time-consuming.
However, the new GST has just one, unified return to be filed. It allows businesses to save a lot of time and effort so that they can focus on expanding rather than taxation.
Composition Scheme For small Businesses
A small business that pays significantly less tax than that of a big trader can opt-out of tedious GST formalities and pay GST at a fixed rate of their turnover. If you want to opt for this amazing scheme, your turnover must be less than Rs. 1 crore.
This limit for businesses operating in northeastern states and Himachal Pradesh is Rs. 75 Lakh.
Improved Logistics With Better Efficiency
The new GST act has eliminated the need to maintain multiple warehouses across the states as there are no CST or state entry tax on inter-state movement. The operational cost of these warehouses was very high, and it created a lot of problems for states.
The goods and service tax has lessened the restriction on inter-state movement which helped businesses to save a lot of money.
Defined Provisions For E-Commerce Operators
E-commerce websites like Amazon and Flipkart faced a lot of problems in delivering the orders to their respective customers because of complicated VAT laws and taxes imposed by different states.
The GST has removed all these complications by defining a clear set of provisions for e-commerce operators that are valid throughout the country. It has helped e-commerce players to operate smoothly anywhere in the country.
These are advantages that businesses have observed in the last three years of GST. Apart from these, GST has helped in increasing employment, revenue for companies and ultimately acted as a catalyst in boosting the Indian economy.
The response from the country to goods and service tax has been mixed. The GST has also been criticized for a couple of reasons. Let us look at some of them below:
Disadvantages of Goods And Service Tax (GST)
The increased Cost Of New GST Software For Accounting
After the implementation of GST in India, businesses need to update their existing accounting to new GST software to avoid any taxation mistakes.
The cost of new software is unavoidable, and companies need to invest a lot of money and effort in training their employees to use them efficiently.
Higher Tax Burden for SMEs
One sector that is not happy with this new goods and service tax is the manufacturing sector. Earlier they would pay excise duty only if their turnover exceeded Rs. 1.5 crore but now any business whose turnover is above Rs. 20 lakh have to pay GST.
Though businesses having turnover up to 75 lakh can opt for the composition scheme but then they will not be able to claim any input tax credit. It creates a dilemma for SMEs to choose between paying higher taxes or choosing a composition scheme.
Being GST-compliant is not Easy for Everyone
The new goods and service tax is an entirely online process, and it is not easy for everyone to grasp the nuances of the GST tax regime. Many small businesses find new GST compliances difficult to understand and seek help from tax professionals.
Issuing GST-compliant invoices, keeping digital records, and filing a timely return is a task in itself for many small traders.
Cost of Hiring Tax Professional
GST has completely changed the way taxes are paid, and businesses are slowly adapting to the new compliances. Many small businesses are bound to hire a tax professional to avoid any taxation mistake. These professionals charge a lot of fees and hence it increases the overhead cost of their operation.
Passing this new goods and service tax was not easy for the Indian government. They had to consider a lot of important things that could possibly damage the Indian economy. But fortunately, after three successful years of its implementation, the country is getting along with GST to boost their country’s GDP in the long run.