Advantages and Disadvantages of GST
A single indirect tax rate to be used in the nation is the goods and services tax (GST). It combines the federal and state taxes levied in the nation into a single tax rate. The Constitution (122nd Amendment) Bill, India’s equivalent of the GST Bill, was first proposed in 2014. This was approved in 2016 and given the name The Constitution (101st Amendment) Bill, 2016 by the Rajya Sabha.
Since India is a federal republic, the central (CGST) and state (SGST) levels of GST would be imposed simultaneously. A common basis will be created and implemented by the Union for both levels. The charge for CGST and SGST will be based on the destination concept. As a result, import taxes will equal domestic goods and services taxes, while exports will no longer be taxed. The nation’s interstate shipments will be subject to an Integrated Goods and Services Tax (IGST). The applicable state’s CGST and SGST will be added to create the IGST. A GST council would be established to address all concerns and suggestions on GST. Additionally, the Centre will levy an extra 1% tax for the supply of products above and above IGST, allocating the revenue generated to the origin states.
The federal government will cover the losses suffered by the states and offer compensation for five years to ensure an effective and successful implementation of the GST. GST registration online would streamline India’s indirect tax structure and lessen administrative burdens. It will bring about a big transformation by establishing a single national market with a single tax system.
Benefits and Limitations of GST
One of the long-awaited fiscal reforms was the implementation of the Goods and Services Tax (GST). Still, for several reasons, it was simply hanging about and unable to get through the barriers for a significant amount of time, leading some to speculate that the reform may never take effect. But all that is history now, and we were fortunate to see this tax reform through to completion. At this point, 200 days have passed since the introduction of the GST. At this point, it’s important to realise that it could become a reality only because of the many benefits of GST registration. The implementation of GST had some drawbacks, some of which were inherent and intrinsic to the idea of GST, some of which were due to the structure in which it was introduced, and a lot of which was due to the implementation method, which could have been largely avoided. Of course, no reform can be fully proven, and GST is no exception.
Advantages of GST
Increases foreign investment and enhances the environment for investment:
A highly negative view of our country’s taxation system was greatly influenced by tax litigation in certain high-profile instances under the Income Tax Act, and numerous charges were made about its certainty. Due to the nation’s complicated regulatory and bureaucratic structures, investment reluctance was growing. Many international investors believed that it would be better to just shut up and go in this tax climate than to continue dealing with it. GST, however, has given people fresh optimism, and the negative memories of the past are gradually receding.
Simply implementing GST and the government’s earnest attempts to simplify GST have created a strong good view of India’s taxation system worldwide. The fact that our economy is growing more quickly, that FDI is expanding, that stock markets are consistently booming, and that the secondary and territorial sectors are contributing more to the national GDP all support this.
Single Authority for Assessing
One significant shift that companies will experience under the GST system is eliminating the need to interact with different taxing authorities. A person would have to contact many tax agencies, such as Central Excise, VAT, Service Tax, etc., just like under the previous tax regime. Under each statute, several registrations were needed, returns had to be submitted, and the same company operations would have to again deal with assessments, appeals, and other processes.
One of the bold steps the government took in implementing GST was to reduce the number of tax authorities from two to one. As a result, an assessee will only need to register with one of the two tax authorities—either the Central Tax Authorities or the State Tax Authorities—rather than both. This will simplify the tax assessment process and eliminate earlier complications.
The enhanced degree of certainty and lower litigation
The primary cause of tax disputes under the previous indirect tax regime was the law’s ambiguity, which left it open to various interpretations, bringing a positive or advantage for GST adoption. Additionally, different taxes on the same tax base resulted in inconsistent interpretations from federal and state tax authorities nationwide, aiding in the proliferation of legal disputes. As most indirect taxes, including Excise, Service Tax, Value Added Tax (VAT), and others, are merged under the GST regime, and as the tax base of the GST regime is kept very broad with a significantly reduced exemption list, this will lead to single, streamlined taxation and decrease litigation in general.
Decrease in price
Businesses are currently unable to use their tax credit payments. For instance, CST Paid was becoming cost, traders could not claim credits for excise duty or service tax, service providers could not claim credits for VAT, and different cesses, such as SBC, were driving up costs for enterprises. All of these cascading taxes would be significantly reduced with the introduction of GST, and as a result, the cost of goods and services should continue to decrease. The costs of products and services can also decrease if interactions are correctly organised and the advantage gained is effectively distributed at all levels. This is in addition to tax reductions. This is a benefit for the business.
Disadvantages of GST
Not in spirit a one-nation, one-tax
If there had been a GST, it would have been ideal if it had only had one legislation and one authority responsible for drafting, overseeing, and regulating the GST law. Contrary to expectations, we currently have 31 laws covering the whole legal system, so it is certainly not one country, one tax.
In other words, Gujarat’s GST law differs from Maharashtra’s. Suppose a person conducts business in both states. In that case, he must register for a separate GST in each state, file separate GST returns, keep multiple state-specific accounts, and have the tax assessed by each state authority separately. This compromises the GST’s basic structure, which was anticipated, to the point where many experts have begun claiming that the GST is not a tax reform but rather a collection of new taxes. It can be a limitation for this biggest history-making point.
Various tax rates
There are now 7 basic tax rates and several cess rates available for different commodities and services, which only create unneeded complexity and categorization conflicts. HSN codes continue to be a headache for the industry and commerce, with many people using the wrong coding method without understanding them. This might result in unneeded problems for firms, such as tax requests with interest and penalties. Instead of the current system with many tax rates, a single rate or dual rate GST system would have been preferable. This is, again, a setback or limitation of GST.
High burden of compliance
Another disadvantage to be discussed is the above-highlighted point because three tax returns must be filed monthly, and the GST compliance rate is exceptionally high. Additionally, a person conducting business in many states must file individual GST returns in each state and get multiple registrations.
This GST system has raised the difficulty of compliance. It hurts compliance, especially for small enterprises that cannot afford to spend much money on support services like accounting, taxation, etc.
The requirement of software acquisition increases the expense
Businesses must either upgrade their current accounting or ERP software to one that complies with GST or purchase it to continue operating. However, both solutions result in higher costs for acquiring software and employee training to use the new billing software effectively. And this makes a major limitation of GST.
We need to recognise the government’s efforts in bringing in GST and the seriousness shown in simplifying it after discussing its numerous benefits and drawbacks. At this point, we must understand that everything has advantages and disadvantages, and the tax system is no different. However, businesses that planned and prepared for the GST transition period properly could capitalise on the advantages while minimising the disadvantages. Success comes to those who act first, as the proverb says. In the past, several various taxes were imposed on both the federal and state levels. With the introduction of the GST as a common route, several Central and State Levies, including excise, VAT (save on some items), sales tax, entertainment tax, and others, have been absorbed.
Registering for GST with Kanakkupillai can be a smart move for any business looking to comply with government regulations and take advantage of the benefits of GST. With their expertise in the GST registration process and filing, Kanakkupillai can ensure that the process is smooth and hassle-free for their clients. By registering for GST, businesses can also gain access to input tax credits, reduce the cascading effect of taxes, and improve their competitiveness in the marketplace. GST registration with Kanakkupillai can help businesses save time and money while ensuring compliance with government regulations.
FAQ on GST Registration
The fees for GST registration of business can sign up for free through the GST Registration Portal. The whole process is done online for free.
SGST for state GST or SGST applies to intrastate sales of goods and services, per the SGST Act. It is administered by each state's government. Only SGST liability can be offset by SGST or IGST input tax credit.
GSTIN or Goods and Service Tax Identification number is a 15 digit number which is assigned to the applicant or businesses when it is successfully registered under GST.
ARN in GST Registration or Application Reference Number is generated once the submission of the application is successful to the official GST servers.
PAN card mandatory for registering GST - The short answer is "yes," PAN cards are required for GST filing. Except for TDS registration, which can be done with a TAN, GST registration cannot begin without a PAN card.
The threshold limit for GST registration if your company's annual sales are more than 40 lakhs (20 lakhs for north-eastern and hill states), you must register as a regular taxable person and pay taxes. A minimum of 20 lakhs is required from service providers (10 lakhs in northeastern and hill regions).
To get a GST number entire GST registration process, including receiving the GST number, takes 7 to 10 working days.
No, current account is not required for a company to register for GST.
Yes, get multiple GST registrations within a state. The company may file for as many GST registrations as desired within a state. For ease of doing business, the process of holding multiple GST registrations only for different industries within a state has been eliminated.
If the GST application is rejected, you will have the opportunity to respond to the rejection notice. However, you would need to wait for a final rejection, which will take about 10 days, if you wanted to submit a fresh application.