GST or the Goods And Services Tax is an indirect tax that is levied on the supply of goods and services. GST has replaced the previous indirect taxes – Central excise duties and additional excise duties, VAT, Service Tax, Sales Tax etc. The Goods & Service Tax Act was passed on 29th March 2017 in Parliament. It came into effect from 1st July 2017. GST is a tax that is applicable nationally. It aims in reducing indirect taxes and unifying the market.
MERITS AND DEMERITS OF GST:
Like everything else does, even the Goods and Services Tax comes with its own merits and demerits. The benefits of GST and the disadvantages of GST are as follows:
BENEFITS OF GST
- Elimination of cascading tax effects
GST helps in bringing the indirect tax regime under one roof. This efficiently eliminated the cascading tax-effect, which means tax charged on the tax process.
- A higher Threshold limit
As GST came into force, the threshold limit for registration has increased. Under VAT, all businesses with turnover over 5 lakhs were bound to pay tax. Under the GST regime, this limit increased to 20 lakhs providing relief to small traders.
- Composition Scheme
The composition Scheme helps businesses whose annual turnover is more than 20 lakhs but does not exceed 75 lakhs to lower their taxes. This option has lowered applicable tax rates and reduced the compliance burden too.
- No. Of compliances have reduced.
Different taxes were filed differently under the previous Taxation regime- monthly filing of excise returns, companies file service taxes monthly. In contrast, proprietorship and partnerships filed service tax quarterly, and in the case of VAT, filing returns varied largely. After implementation of the Goods and Service Tax, the taxpayers require filing only one return.
- Easy Online Process
The taxpayers now register with GST and can file GST returns online. Online tax filing has a simple interface, and the process is hassle-free. GST has also established clarity about taxation jurisdiction between Central and State governments.
- Decreased Tax Rate
It has reduced tax rates on some goods by 2% and 7.5%.
- Reduced Logistics Cost
It has reduced logistic cost by removing border taxes and resolving the check post discrepancies.
- Revenue Generation
The Goods and Services Tax system generates better revenue for the government as tax collection costs have come down.
DISADVANTAGES OF GST
- SMEs Tax Burden
The earlier tax rules had businesses paying excise duty if their annual turnover exceeded Rs.1.5 crore. Under GST laws, businesses whose annual turnover exceeds Rs. 40 lakh must pay GST.
- Increase I Operational Costs
Business firms had to switch to GST compliant softwares to run their businesses smoothly. But the cost and installation of the software, plus training the employees to use that software, increases the operational costs of a business.
- Compliance Burden
After the implementation of GST, it has become mandatory for businesses to register with GST in all States where their business is operating. This additional registration process under the regulatory body, digital-record keeping, issuing of GST invoices and filling the returns increases the burden on SMEs.
