GST, known as Goods and Services Tax, was implemented in 2017.
The goal was to create a uniform tax system for transactions in goods and services. GST is good for organized business, But we know that India’s economy runs from the unorganized sector. Although GST is considered as a historic tax reform in India, It also has advantages and disadvantages which we will now discuss.
The GST benefits are:
- GST is a simple tax structure And it reduces the number of indirect taxes.
- It has no hidden taxes, No additional tax for GST registered retailers, So the cost of doing business will be less.
- Previously, under the VAT structure, any business with a turnover of more than Rs 5 lakh (in most states) had to pay VAT. Under the GST system, however, this limit has been increased to Rs. 20 lakhs. Which gives discounts to many small businesses and service providers.
- The entire process of GST (filing of return from registration) is done online and it is very easy.
- Previously there was VAT and service tax, each with its own return and compliance. Only one return has to be submitted under GST.
- Schedule for e-commerce operators.
- Previously, the logistics industry in India had to maintain multiple warehouses across different states to avoid state entry tax. Under GST, these restrictions on inter-state movement of goods have been reduced.
Let us now look at the disadvantages of GST. Please note that these difficulties need to be overcome in order for businesses to function properly.
The GST disadvantages are:
Traders need to update their existing accounting or ERP software to be GST-friendly. Or you have to buy GST software, the cost will increase due to buying new software.
Failure to comply with the GST may result in fines, As small and medium enterprises (SMEs) have not yet gone digital, It will take time to refine the GST tax system. With digital record-keeping and of course timely return must be submitted.
Small businesses, especially in the manufacturing sector, will face problems under GST.
Previously, only businesses that exceeded Rs 1.5 crore had to pay taxes, But now any business with a turnover of more than Rs 20 lakh has to pay GST.
Industries like coal and petroleum are not covered by GST, Which makes it inconvenient for oil and petroleum companies. Because they cannot claim input tax credit.
GST on companies doing business in different states, Registration is required for each state separately. This will increase the cost of its management.