Advantage and Disadvantages of GST

GST stands for Goods and Services Tax; it is an Indirect Tax which consolidated all the taxes which the State and Central government levied. It was introduced in India in July 2017. It is divided into slabs- 0%, 5%, 12%, 18% and 28%. The exceptions from this tax are petroleum products, alcoholic beverages and electricity, which still follow the old taxation system and vary from state to state.

Advantages of GST

Goods and Services Tax had proved to be advantageous in various ways to the consumer, the seller and the government.

Customer’s Benefits

- Solved the problem of Cascading Taxes, which is the addition of taxes at each stage of manufacture leading to inflation.

- Uniformity of prices makes the market equal for all members of society in all parts of the country.

- Before GST was introduced the tax rate for goods was around 26.5%, but now after GST implementation, the majority of market goods have a tax of approximately 18%.

- GST indirectly also reduced the travel time in interstate movement during the chain of supply by 20% due to the disbanding of check posts.

- Tracking of taxes has become easy since it works on a computerized system.

Sellers’ Benefits

- The higher turnover limits for GST allowed small scale businesses and service providers to be exempted from paying GST.

- The Composition Scheme introduced under GST reduced taxes and increased tax compliance. Business owners registered under this scheme pay a fixed tax percentage of their turnover and only need to file one quarterly return.

- Businesses with an annual turnover of Rs. 50 Lakhs pay GST of 6% instead of 18%.

- GST registration and return filing can all be done online, in contrast to pre-GST years when one business would need to be registered under various taxes.

- The number of compliances has decreased because the number of Indirect Taxes has been reduced to one, GST. The return filing has also been unified and adopted to suit only GST.

- E-commerce brands like Flipkart and Amazon can experience hassle-free transport of goods inter-state due to the removal of VAT restrictions whose rules were different in some states.

- Reduction in unnecessary logistics costs and the removal of interstate travel restrictions are increasing the profits for businesses in the supply of goods.

- Largely unregulated industries like textile and construction have been organized after the implementation of GST. There are provisions for availing input credit only after the amount has been accepted, this has brought in regulation into the industries.

Government’s Benefits

- The transparent and accountable market formed by GST promotes Indian products internationally and attracts foreign investments.
- Through GST the government was able to broaden the tax base as well as increase tax compliance.

- The import, export, and investment sectors are booming which in turn help the country by boosting the economy and generating more employment opportunities.

- The uniformity of taxes and prices across states helps the Indian economy as a whole instead of just the states.

Disadvantages of GST

Although the introduction of GST was sudden it was well implemented. But there are a few problems to its implementation which caused some problems for the sellers and businesses.

Cost of Software Purchase- Businesses had to discard the pre- existing software and purchase new GST- compliant software. The extra time is taken to train the employees for using the same also led to losses and increased costs.

Increase in Operational Costs- Since GST changed the entire method of paying taxes the companies have to hire professionals to sort out the taxation problems and make the company GST compliant, which leads to an increase in overhead costs.

GST was introduced in the middle of the financial year- Due to this companies couldn’t manage both the new taxation methods and the old ones which caused them to run parallel which caused a lot of confusion and GST compliance issues.

Get Your GST Registration Now!

The GST registration benefits are many which we have explained above. For further information, you can visit our website for GST registration, where we have put up all the information which is required for you to get a GSTIN Number for your business.

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