The GST is levied on goods and services in the country. It is a tax which subsumes the indirect taxes such as excise, value added tax and service tax that are imposed by the state and centre.
The Advantages of GST Registration are as follows:
GST eliminates cascading in taxes
GST, a comprehensive indirect tax was formed by consolidating the indirect taxes into a single tax window. This tax system eliminates the cascading effect of tax which is also known as ‘Tax on Tax’.
Increased the registration threshold
Earlier, businesses with turnover of more than Rs 5 lakhs (in most states) had to pay VAT which did vary from state to state. Service providers did not have to pay service tax if they did not have a turnover of more that Rs 10 lakhs.
The threshold limit has now been increased to Rs 20 lakhs as per the new GST regime.
Small business’ composition scheme
Under the composition scheme, small businesses with a turnover of Rs 20 lakhs to 75 lakhs can pay low taxes. Reiterating further, the with less compliance burden, small businesses whose turnover is less than Rs 1.0 crore can opt for this scheme. The limit is Rs 75 lakhs for Himachal Pradesh and North-Eastern states.
Hassle free online procedure
From registration to return filing can be done online. This facility helps small businesses to apply for GST registration online and file returns without any difficulty.
After the GST revision, the plethora of taxes namely the excise tax, service tax and VAT tax has been subsumed into a single tax. This has reduced the cascading effect on taxes meaning the number of return on taxes has been altered. There are 4 basic returns under GST out of the 11 returns that a taxpayer needs to file.
Defined treatment for E-commerce operators
The differential treatments and spurious compliances have been removed under GST. The applicable provisions with regards to the E-commerce sector have been clearly elucidated in the revised GST. Since these provision are applicable pan India, the interstate movement of goods would not have any complications.
Better logistics efficiency
Multiple warehouses had to be managed by the logistics industry for inter-state movements in order to cut costs. Hence the warehouses had to operate without using their maximum capacity which increased the operating costs. The revised GST has mitigated the complications in inter-state movement of goods as a result of which thee-commerce aggregators have started operations at strategic locations instead. Businesses involved in the supply of goods transportation have been benefited by the reduction in logistics costs.
Regulating the unorganized sector
Industries like textile and construction had a complicated tax structure. With the revised GST, better provisions were made available for payments and compliances.
The Disadvantages of GST are as follows:
- Cost increase
Today, businesses that do not have GST compliant ERP or accounting software are forced to buy the GST software in order to run their business. This has led to increased costs due as the employees need to be given training in order to efficiently utilize the billing software.
- For GST-compliance
Sprouting small to medium-sized enterprises and businesses need to understand the new GST structure and have to adopt the practice of issuing GST-compliant invoices, keeping digital records of the transactions and file returns. Specifics such as HSN codes, GSTIN and place of supply have to be mentioned in the GST-compliant invoice.
- Increase in operational costs
It is going to be an expensive affair to hire tax professionals and experts for GST compliance. The overhead expenses would be increased since the employees need to be trained in GST compliance.
- Online taxation system
Filing returns, making payments and keeping records have to be done online which would not be an easy task to adopt for small or medium sized businesses.
- Higher tax burden on SMEs
Small to medium sized businesses with turnover of uptoRs 75 lakhs would require paying 1% tax on turnover in lieu of GST in order to enjoy lesser compliances under the composition scheme. It will be tough for small to medium sized businesses because such businesses cannot claim input tax credit.
This reform is going to be a difficult to adopt for small to medium sized businesses. The government is trying to mitigate and simply the GST system which will help the business industry to function smoothly