It was 2017 when the government of India decided to undertake major reform and introduce GST. It was one tax that replaced most of the others and created uniformity. Even after years of being implemented, many people do not fully understand the advantages and disadvantages of the GST. There is some confusion regarding whether it was a good decision or not, and the opinion may vary.
This article will help you understand the pros and cons of GST and empower you to make your own decision.
Understanding GST
GST stands for Goods and Services Tax, which was introduced by the Indian Government in July 2017. It marked the end of various taxes charged, including VAT (Value Added Tax), and brought “One Nation One Tax”. The percentage of GST that is charged on different goods varies. The table below will help you understand better:
| GST Rate | Items |
| 0% | Fresh Milk and Cream, Rice, wheat, maize, and other grains, Coffee Beans, etc. |
| 5% | Natural graphite, Natural gums, Fishing vessels, etc. |
| 12% | Condensed milk, Bamboo flooring, etc. |
| 18% | TV up to 27 inches, Refrigerator, Geyser, Cooler and Fan, Electric Appliances, etc. |
| 28% | Online Gaming, High-end motorcycles, Aircraft for personal use, Smoking pipes, etc. |
Advantages of GST
1. Eliminate Double Taxation
Previous to GST, people had to pay tax on tax. With the acceptance of GST, the double taxation system has been eliminated, helping in keeping prices competitive.
2. One Nation, One Tax
Businesses now only have to deal with one tax rather than five or six. Fewer rules, less confusion. GST encouraged the concept of “one nation, one tax.”
3. Quicker Delivery
Do you recall the long wait times for trucks at state borders? Goods now move more quickly due to fewer obstacles and a standardized tax, ensuring quicker delivery.
4. More Companies Getting Official
Small businesses and vendors are registering in order to receive the benefits of GST. As a result, the economy is stronger and cleaner. The customers have growing confidence in new businesses, ensuring credibility.
5. Improved accessibility
Everything is done digitally, including tracking payments and filing returns. Digitalization has made everything more accessible. Also, this has improved the trustworthiness as the scope of committing fraud has reduced.
Examples:
- Reliance Retail benefits from unified tax filing across multiple states instead of separate VATs.
- Flipkart reduces delivery time as trucks move faster without state border tax checks.
- Zomato ensures all restaurant partners are GST-compliant to claim ITC, encouraging formalization.
- Tata Motors uses e-invoicing and automated filing to maintain clean records for audits and ITC.
Disadvantages of GST
1. Difficult for Small Companies
Due to the complexity of GST regulations, many small businesses have to hire professionals just to file returns, which adds to their stress and expenses.
2. Too Many Forms
For small business owners in particular, filing on a monthly, quarterly, and annual basis can feel like an endless amount of homework.
3. Technical Issues Occur
The GST website occasionally crashes or malfunctions, which frustrates users and delays work.
4. The Rules Change Frequently
A new rule appears just when you think you understand the previous one. It’s challenging to stay up to date with frequent updates.
Examples:
- Local Kirana Chains may struggle with GST filings and hire extra consultants.
- Retail stores on Amazon face compliance pressure due to frequent return filing requirements.
- Sellers often get stuck due to GST portal crashes, causing return delays.
- Cement companies pay 28% GST on cement, making infrastructure projects costlier.
What are the Different Types of GST?
GST is mainly of 4 types, each to suit different situations. They are explained below for better understanding:
SGST
For transactions that take place within a state, the State Government collects SGST. Roads, schools, and state-run services are all funded with this money.
For instance, the Maharashtra government receives an additional 9% of the laptop purchase from Mumbai as SGS
CGST
The portion of GST that is paid to the Central Government is known as CGST when you purchase goods or services within the same state. The money raised supports national-level services, defence, and central projects.
For instance, you will pay CGST in addition to SGST if you purchase a laptop in Mumbai and the seller is also based there.
IGST
When goods or services are transferred between states (interstate trade), IGST is assessed. The Central Government collects it and then gives the destination state a share.
When a seller in Tamil Nadu ships a television set to a buyer in Kerala, IGST is applied (let’s say 18%) rather than CGST and SGST being charged separately.
UGST
Union Territories (UTs) use UTGST, which is comparable to SGST. For any purchase made within the borders of UTs, this tax is levied.
For instance, when you purchase groceries in Daman, the bill includes both CGST and UTGST.
Bottomline
The conclusion can be drawn that the introduction of GST has both advantages and disadvantages. For many people, it may be a good way to formalize their business and scale. While some may have trouble adjusting to the changes and bear the extra cost of hiring personnel for the same. Spreading awareness and teaching about the topic is very important to enable individuals and businesses to benefit from GST.
The replacement of multiple taxes has helped clean the economy from fraud. A more strategic approach and proper planning will result in even better implementation of GST, benefiting the whole nation.
Written by: Tanya Kumari
