GST stands for Goods and Service Tax. GST is implemented in India to unify the taxes and cut down the indirect taxes in the market. Like any other reform, even GST has its fair share of pros and cons.
In this article, we will discuss the advantages and disadvantages of GST and how to register for GST.
Advantages and Disadvantages of GST for Businesses in India
Here we will discuss the advantages and advantages of GST one by one. At the end of this article you will aware of the benefits of GST for your business.
Advantages of GST
- It reduces the number of indirect taxes. It is the only transparent tax.
- With the introduction of GST, the cost of products and services is expected to reduce in the long run.
- Since no hidden costs are involved, the cost of doing business is lowered with the introduction of GST.
- Businesses with less than Rs.20 Lakh annual turnover are exempted from GST, while the threshold is Rs.10 Lakh in North East India. It will give relief to small business owners from lengthy taxation rules.
- The process for registration of GST is very simple. Since the world is moving online, the process of applying for GST has become even easier. People who want to apply for the GST need not run from one government official to another to get the work done.
- It reduces corruption, as businesses cannot run without paying the receipts.
- GST has already reduced the taxes on certain goods. The tax is reduced by 7.5% for smartphones and cars, and for other products, the tax is reduced by 2%.
- GST will help in building a corrupt-free and transparent administration.
- It reduces the cost of logistics by eliminating taxes across borders and check-posts.
- All the e-commerce operators have got defined treatment. Before the introduction of GST, different states were considering e-commerce platforms like Amazon and Flipkart as facilitators, and they were levied multiple taxes. To avoid all this confusion, GST has helped.
- Before GST, certain industries like Textile and construction were unorganized. With the introduction of GST, these industries are now accountable and regulated.
Disadvantages of GST
- As GST is now online, companies have to update their existing software or ERP to be GST compliant. Both of these options have increased the burden on software purchases. Moreover, companies have to train employees on how to utilize the software.
- Small and Medium companies still need help understanding the GST policies. Any company that fails to be GST compliant will likely get a penalty. GST-compliant invoices and GSTIN are compulsory for filing the tax.
- Companies now need a tax professional to help them be GST compliant. This additional hiring of a tax expert will increase expenses for small and medium businesses.
- GST is now taxing businesses like wheelchairs, braille paper, hearing aid, etc. It did not charge these businesses related to the disabled earlier.
- Insurance premiums have become more expensive after the introduction of GST.
- The transaction fees of GST have increased from 15% to 18%, making it more expensive than ever.
- After GST, the price of real estate increased by 8%, which led to a fall of 12% in real estate demand. However, one must see whether the trend continues for the long or short term.
- The aviation industry is likely to get affected. Earlier the service tax on this industry was only 6-9%. However, with GST, the tax goes up to fifteen to eighteen percent. It means the tax in the aviation industry has almost doubled.
- A few experts say CGST and SGST are not new in the taxation system. In fact, CGST is similar to the Central Excise, and SGST is similar to the state tax. So, there is little reduction in the tax layers.
- SMEs are likely to have a high burden because, in the previous tax system, companies that exceeded a turnover of 1.5 crores annually needed to pay tax. But now, companies that exceed Rs.20 lakh annual turnover need to pay the tax.
We hope you are now aware about the advantages and disadvantages of GST in India. The Indian government is trying to smoothen the process to get accustomed to the new taxation, GST. However, like any other reform, even GST comes with many hiccups. We hope the government gives SMEs more flexibility through the GST.