GST is one of the significant tax laws change in India. One of the noticeable GST benefits is that it has levied the cascade effect from the taxation laws successfully, which were imposed by the Central and the State like service tax, VAT and excise. But whenever there is something new introduced, it comes up with both: advantages and disadvantages. In this article, we will talk about the benefits of GST and disadvantages involved with the Goods and services tax.
ADVANTAGES OF GST
The cascading effect got eliminated: Goods and Services taxes are the forms of indirect tax, which has brought all other indirect taxes under one umbrella. Previously there were taxes upon taxes which is commonly known as the cascade effect. In that every time there was a sale of absolute good, one or more taxes needed to be paid. GST benefits have made the taxation smooth and free from any confusion.
Higher registration threshold: According to the VAT structure, businesses with a turnover of more than 5 lacs were liable to pay VAT. The limit also varied in different states. The service tax was freed from businesses with a turnover of fewer than 10 lacs. As one of the GST benefits the limit was increased to 20 lacs.
Composition scheme for new businesses: As per the composition scheme under GST, small businesses that have a turnover of Rs. 20 lacs to 75 lacs, get benefited by lowering the taxes. The tax and the compliance burden were much relieved for many small businesses.
Online procedure for every step: Taken from the registration to paying the GST certification fees and fillings; everything related to GST can be done online. It has become beneficial, easy and straightforward, for the startups especially. Now new businesses don’t need to rush for different tax registrations.
Defined treatment for e-commerce business: Previously supplying goods through the e-commerce sector was not defined. For example, previously when Amazon or Flipkart delivered any good in Madhya Pradesh, they needed to file a Vat declaration and also have to mention the registration number in the delivery truck. If the documents were not produced, the tax authorities have all the rights to seize the good. All the confusing compliances were removed under GST benefits.
DISADVANTAGES OF GST
Cost of the software purchase: The ERP software which was being used previously needed to get upgraded to GST software, or the businesses need to purchase the GST software directly, to keep their businesses going. The new software increased the cost of buying the same and in the training of the employees, to efficiently use the new billing software.
Increased operational cost: The GST regime is already a new law in the taxation process in India. GST has changed the way how taxes were being paid previously. Due to the latest software launch, the businesses now need to employ tax professionals for the compliances of GST returns. This way, the operation cost of the businesses will grow gradually, as they need to spend the additional cost of hiring experts.
It came into action in the middle of the financial year: For Goods and Services tax being introduced in the middle of the year. Businesses had to follow the previous tax routine for three months and the new regime for the rest of the year. It was simply hard for businesses to adjust to the new tax regime, which also created confusion and compliance issues.
Change is never an easy task. Thus, GST advantages and disadvantages are equally important to be considered. The government is trying to make the road to GST easy to cope with, for SMEs and businesses.
GST law has been implemented in other economies before it got introduced in India. It is better to have a unified taxation system with accessible input credits.