The goods and services tax (GST) is a comprehensive indirect tax that being levied on the manufacture, procurement, sale and consumption of goods and services across the nation. It will be replaced by all the Central, and State Government implemented indirect taxes on goods and services.
Though GST has become a historical tax reform that India has made, it comes with its shares of demerits. In this article, we are going to take a brief look at the most significant advantages and disadvantages of GST that common people will have to go through.
Advantages of GST (Goods and Services Tax)
Welcomed by many sections of the society, the GST will have the following long term and short term advantages:
- Being a transparent taxation system, GST will significantly reduce the number of indirect taxes that are being levied on goods and services till date.
- GST will not put any additional cost on the registered retailers. It means there will be no hidden taxes involved, which will ultimately bring down the cost of doing business.
- GST is going to benefit people at large as it will bring down the inflation with a decrease in price and increase in consumption.
- The entire production and distribution cycle for any good use services and vice versa. This will increase after the implementation of GST.
- The previous tax system, which had separate taxes for goods and services, need to be divided into the transactional value of goods and services for calculating the tax. This particular calculation of tax leads to greater complications and requires more administration and compliance cost.
- The GST system will integrate all the taxes, which might make it possible to divide the tax burden between both the manufacturer and the service provider.
- Now, the GST will be levied at the final stage of the consumption of goods and services, which will be based on the VAT principle. There will be no longer taxation at various points coming between the manufacturing and retailing. This will help in removing any economic distortions and will bring significant development to the common national market.
- GST is meant to build a more transparent tax administration system which will be free of corruption.
- Previously, the tax was levied on the final product when it went out from the factory for sale and then it was again levied at the retail outlet when it is available for sale.
- GST is being backed by the fully integrated tax platform called GSTN which constitutes all aspects of GST.
Now that we have discussed the advantages, we must take a look at its disadvantages as well.
Disadvantages of GST (Goods and Services Tax)
A lot of hype has been created in and around the GST, despite having a plethora of PROs, GST has its share of CONs that are bothering common people. Some prominent ones’ include:
- Some economists are saying that the government’s move to bring in GST will have a negative impact on the real estate market. The new implemented GST will supposedly have 8 percent increase in the cost of the new house whereas; the demand will decrease by almost 12 percent.
- Some experts believe that new coined CGST and SGST are nothing but the new names for excise/service tax, VAT and other state/central taxes. Thus, there will hardly be any reduction in the tax layer for the end tax payer.
- Some products like branded goods and electronics might become expensive after GST roll out, though this will be clear after a certain point of time only.
- It is being said that aviation industry will be the worst hit by the GST, as the previous range of service tax on airfares was from six to nine percent. GST has proposed to increase the service tax by 15 percent, but not for the economy class travel.
- Adopting and migrating to the new system for GST will have teething troubles and learning the new system will disturb the entire eco-system.
No matter what people will say now, the new tax system has come into force and now only time will tell how good or bad it is for the development of Indian economy.