For very many years, the Indian Taxation System was a mesh of taxes, further complicated by hundreds of different rules, tax laws, and payment formalities. The Goods and Services Tax, or GST, untangled the financial wires and made taxation simpler, across the country.
As with any massive reform that has an impact on the entire country, there are some opportunities and a few obstacles that come across during the implementation phase.
This article shows you the top-5 advantages of GST, which make it one of the best financial reforms that India ever saw, and presents five obstacles that take away its sheen.
- Universal Tax Structure
Before the introduction of GST, taxes were divided under two heads:
- Central Taxes
Central taxes included taxes like Customs Duty, Excise Duty, Sales Tax, various cesses, and surcharge.
- State Taxes
Taxes like VAT, Entertainment Tax, Works Contract Tax (WCT), Luxury Tax, Sales Tax, various cesses, and surcharge form a part of State taxes.
GST subsumes all the taxes mentioned above. Hence, if you own a business that is not a part of the petrochemical industry, you can expect to carry your business throughout India by understanding the mechanism of just one tax instead of multiple taxes earlier.
- Uniform Registration Process
Before the GST, tax registration was a costly and time-consuming affair. Conducting your business in different states meant registering and adhering to state-specific tax structures. Any business with pan-India presence required to keep separate experts for understanding state-specific taxes.
With GST, registration and payment of taxes has become easy. As everything is online and universal, you can register your business anywhere and take it beyond that place, without running after tax experts.
- Easy Returns Filing
As taxes were myriad, so were the formalities. Except for Central Excise and Customs Duty, almost all other taxes had different protocols and time-range. Thus, sticking to deadlines was one thing where businesses devoted a lot of their productive time.
GST simplifies the returns filing process. The date announced by the GST Council for depositing tax and filing returns is uniform for the entire country.
As businesses stop wasting time on running from pillar to post to file taxes, what they get is more cash in their hands, less corruption, and more time at their disposal.
GST revolutionised the taxation system by eliminating the need for businesses to visit multiple tax authorities for depositing taxes. You may devote the time saved in this process to other productive activities.
- Attract Investments
The World Bank’s Ease of Doing Business Index factors in several components that ranks a country’s investor-friendly image. In 2011, India scored 132 in the rankings, which improved to 63 in 2019. Major credit for this goes to GST.
As GST simplified taxes, attracting foreign investments just got easier. You can use this as an opportunity to expand your business by getting the much-needed capital.
Despite having several advantages, GST has its flaws that can act as obstacles for your business.
- Completely Digital
As the entire process of GST is online, it can create obstacles for you if you are not familiar with computers or do not have internet access. As India’s total rural area far outweighs the urban, getting access to the internet and computers can be a luxury for many, thus defeating the ultimate purpose of GST.
- High Penalty
There are several penalties under GST, the amount of which can extend beyond the capacity of many small business owners. As a business, you must spend some time to understand the penalty for non-compliance to the various rules of GST.
- Refunds Take More Time
As GST is a centralised process, it takes more time to verify the physical receipts, thereby delaying the refund process.
- Lack of Transparent Guidelines
As GST is new and at a nascent stage, let alone businesses, many professional tax experts also do not understand GST in its entirety. Lack of a dedicated helpline number further aggravates the problem.
Thus, before filing returns, you should go through the available resources and discuss it with multiple tax experts before filing returns online.
- Other Issues
Several other issues like problems with GSTR 2A, 3B, 1, and the TRAN 1 form plague GST. If you are a small business owner, solving these issues can require you to spend some amount on hiring an expert or buying software.
The Ending Note
Despite having several disadvantages, the opportunities offered by GST overrule the negative attributes. Keep yourself updated with the GST new registration policy, as this would save you from unnecessary trouble.