In the year 2017, the Government introduced the new taxation system of GST – a unified, consumption-based tax imposed by the Indian Government on the dealing of essential goods and services. It is a form of indirect tax that has been implemented to end various previously existing State and Central taxes.
Since any change or reform comes with its own set of merits and demerits, here is a look at the associated advantages of GST along with its disadvantages.
Know the pros of GST
There are several notable advantages of GST, including:
- Eliminate cascading effects
According to the current GST regime, consumers will pay a single tax over their purchase of goods and services. However, there is a well-framed structure of input tax credit to make sure that the previously existing cascading effect is removed. GST is only applicable to the value of goods and services.
- Encourages better logistics
Before the implementation of GST, businesses had to control several warehouses across states to ensure bypassing CST and state taxes on inter-state trading. These warehouses used to operate below their range, thereby giving space for raised operational costs.
- Forms a common national market
With the implementation of GST, there has been a remarkable rise in India’s tax to GDP that boosts economic stability in the long run. This all-inclusive tax results in uniformity among various sectors and eliminate economic loss to form a common market.
- Removes multiple taxes
One of the primary advantages of GST registration is that it unites different tax categories like Central Excise Duty, Service Tax, Sales Tax etc. It effectively removes multiple layers of taxes imposed on goods and services.
Know the cons of GST
A few of the significant disadvantages of GST are as follows:
- Higher tax on SMEs
Earlier, SMEs were required to pay excise duty tax on more than Rs.1.5 crore yearly turnover. Currently, businesses with an annual turnover exceeding Rs.40 lakh are required to pay GST. Hence, due to this new regulation, GST has impacted businesses, especially SMEs.
- Online taxation system
From registering for GST online to filing GST returns, the GovernmentGovernment has transferred the entire procedure online. However, while businesses are growing more digitally sound, SMEs are not proficient with modern-day technologies. Therefore, it is quite a daunting task for many businesses to adopt the new GST structure.
- Penalties for non-registered firms
As per the new GST regime, every small or big organisation must register through the GST portal. If they do not do so, they will be charged penalties. It is quite possible for MSMEs not to understand the modulations of the GST tax regime. In that case, they can see help from experts or search for online help.
Now, when borrowers know about the GST meaning, including its pros and cons, they must register their business on time by maintaining proper protocols. This is essential because proof of GST registration is required if individuals apply for a business loan from reputed NBFCs to expand their business.
Few leading non-banking financial lenders like Bajaj Finserv also provide pre-approved offers to make the loaning procedure simple and hassle-free. These exclusive offers are available on a host of financial products such as personal loans, credit cards etc. Prospective applicants can check their pre-approved loan offer online by submitting their name and contact information.
Though new systems are promoted to eliminate the issues of earlier systems, they come up with their set of advantages and disadvantages as well. The Indian Government has replaced taxes with GST to straighten tax procedures and boost the country’s economy. So far, the number of advantages proffered by this system has outweighed the disadvantages to quite an extent.