GST: Advantages and Disadvantages

The GST replaced several taxes on goods and services such as VAT, sales tax, etc. to prevent tax evasion. The anti-tax evasion actions have improved by 72% between the financial year 2018 to the financial year 2019.

What is GST?

The goods and services tax (GST) is a kind of federal sales tax indirectly levied on certain products and services following the GST slab approved by the budget every year. When a product is bought or a service is hired, the seller adds the GST to the price of the product or service following the GST slab. The GST replaced several taxes on goods and services such as VAT, sales tax, etc., to prevent tax evasion.

India launched a dual GST system in 2017, which was one of the biggest reforms in the country. Integrating the GST was to eradicate tax on tax, or dual taxation, which cascades from the manufacturer level to the consumer level

What are the GST advantages and disadvantages?

10 benefits of GST are as follows:

  • A rich and complete system of income tax is the basis of the GST rule in India. Everything is available online, all taxpayer services such as registrations, returns, payments, etc., to make the compliance effortless and transparent.
  • GST assures neutrality to the indirect tax rates and structures across the country. That boosts the certainty and comfort of conducting business.
  • A method of smooth tax credits throughout the chain of value-adding, and across borders of states to ensure minimal cascading of taxes.
  • The decline in marketing costs of doing business certainly guides to improving competitiveness for the business and enterprise.
  • The encompassing of major State, and Central taxes in GST, entire and exhaustive set-off of input goods and services reduces the expense of locally manufactured goods and services.
  • Supported by a rich end-to-end income tax system, GST is simpler to understand than all other indirect taxes imposed by the Centre and State.
  • From one phase to another in the chain of value-adding, there is an in-built tool in the structure of GST is incentivize tax compliance by merchants.
  • GST reduces the cost of collecting the Government's tax revenues and will, therefore, guide to higher revenue efficiency.
  • Under GST, there is only one tax from the manufacturing to the consumption, directing to the clarity of taxes paid to the final buyer.
  • GST is a tax only on value addition at each phase. Because of efficiency gains and the prevention of leakages, the overall tax burden on most commodities will decrease.

10 disadvantages of GST:

  • The implementation of GST has increased the cost due to stress on software purchases.
  • Several Indian traders are not tech-savvy enough, which creates a gap in understanding the taxation and filing system.
  • For the management and administration of the compliance process, the requirement and cost of employment have increased.
  • Businesses require to prepare their employees in GST compliance and train them to keep a record at every phase, further increasing their overhead expenditure.
  • It has increased the tax liability on small and medium-sized businesses.
  • It has increased the burden of tax compliance solely on the business.
  • Every business has to register with the GST portal. Otherwise, it attracts penalties.
  • The traders should be ready to face any kind of technical glitch and should secure a backup of all the data.
  • It can be difficult for businesses to adjust to the GST regime along with the other tax system to be maintained parallelly.
  • Any little mistake in filing the compliance can lead to not availability of the tax credits.

What are the benefits of the GST in business?

Despite several advantages and disadvantages of GST in India, it has brought certain benefits. As per a report presented before Parliament in 2021, by the Controller and Auditor General of India, the anti-tax evasion actions have improved by 72% between the financial year 2018 to the financial year 2019.

The tax experts from Quick Company can help you in intelligent tax planning and assist you in accurate compliance with the GST regime.