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Advantages and Disadvantages of GST


GST is a destination based indirect tax which has replaced several other indirect taxes earlier levied in the country. The tax has created a coalition between central and state levels and reformed the taxation regimes. It has provided a basic single and cooperative linkup between the Indian markets which in turn will boost the economy as a whole. Our nation has gained a lot from GST but there have been some losses too. Many people are curious to know whether GST has been beneficial for them and the nation or not. So, H&R Block has summarised the advantages and disadvantages of GST. 


Advantages of GST

  • Goods and Services Tax has changed the face of indirect tax regime in the nation. It has subsumed several indirect taxes and therefore simplified taxes for businesses and compliance easier.
  • With GST already into effect and filing for the month of July in the process, the government is making considerable gains in revenue. GST has brought a large number of entities into the tax net.
  • Industry experts expect that GST should reduce logistics and inventory costs in the long run. The slow movement across the state levels of goods carrier has stopped with the transit speed increasing considerably. As per one of the surveys conducted recently, it has been estimated that the Indians will be able to save almost about Rs 2300 crore which is spent at the various check post at the border of the state.
  • As is the norm with the current tax laws in India, there isn’t any input on capital goods. But with the new GST Tax laws, one can avail input tax credit on the capital goods. That way, the investment might surge up quite a bit with an expected 6% increase.
  • The normal rules stay put as the 2% interstate-levy with the major chunk of production kept within the state itself. However, with the change in rules, the tax amount can be dispersed across the nation to offer a greater lift for the lesser-developed.
  • Many countries follow a GST Tax regime and the new tax will make it easy for everyone to understand the bill. People have already started verifying the bills at restaurants and other retail outlets for the right tax. Earlier, there were many cases of people being charged inappropriately and this has ended with GST.
  • GST will also lead to less corruption and there will be a significant reduction in corruption as all the money spent needs to be reported for the taxation purpose. Moreover, the retailer would not be able to make sales without the bill hence the cases of income tax evasion will also reduce a lot.
  • This advantage is totally for the consumers who are planning to buy car or phones. The overall tax rate has been reduced by at least 2 percent and the car price of most of the cars have been reduced. Another such impact is on phones and Apple recently reduced the phone of the price by as much as 7.5%.
  • In one of the studies conducted by HSBC, the GST would have a positive impact on GDP of the country and the GDP of the country will increase by at least 80bps which translate to 0.80%. This is surely a great help to the targets set by the Government.

There remain quite a few disadvantages associated with the GST Tax. We’ll now look onto the other side of the coin of GST Tax with our entry down below.

Disadvantages of GST

  • According to the experts, terms such as GST which includes CGST, SGST, and IGST is nothing but just a new name in accordance with the existing tax systems. Kind of old wine in a new bottle.
  • The Service Tax which stood at 15% in the previous regime, has now been replaced with GST at 18%. As such many services have become costlier with telecom, airline and banking affected majorly. In fact, insurance and petroleum are also said to be majorly affected by the enactment of GST Tax.
  • The GST Act has given the control of businesses to Central and State Governments with businessmen binding by-laws. This has given rise to complexity for many businessmen across the nation.
  • Post GST implementation, the first few instances of application have resulted in high tax outgo for businesses. Businesses are trying to claim the credit of input tax but several cases of mismatch of data are coming up. As a result, there is chaos among the tax filers.
  • The opposition has called it as a Disability Tax as many of the things related to disabled people which were earlier tax-free are now included in GST taxation. Prior to implementation of GST, brail paper, typewriter, hearing aid and motorised wheelchair were tax-free whereas these things are being taxed now. The opposition has made pleas to roll back the tax on such items.
  • On one end, the government is trying to give a push to banking services and insurance in India and on the other end, the government has decided to tax banking and insurance service at higher rates when compared to the previous rates.
  • GST has also had an impact on discount and reward programs as well. The product is being taxed on the rates pre-discount whereas the products were earlier taxed at post discount prices. Most of the companies have also suspended reward programs for temporary basis because of complexities of GST.
  • The government has chosen a mid-year launch for GST and this will lead to problems in taxation and reporting during the end of the financial year. Ideally, the government should have launched GST at end of financial year as this would have avoided a lot of confusion during taxation and reporting.
  • As per GST, the seller requires registering in all the states that it does business in and it has increased the complexity for the seller. The government should have created a provision for centralised registration of State GST as this would have helped many sellers during the rollout.

GST is the new regime of indirect tax in the nation which has modified the existing indirect tax rules. It has scheduled a coalition between central and state government amidst the cry for better taxation system which it duly delivered. However, a coin holds two sides, and as such GST has both, some advantages and some disadvantages.

How can H&R Block help you?

After implementation of GST, the tax compliance requirements changed drastically. As a result, several businesses find it challenging to focus on their business while trying to be GST compliant. This is where we come into the picture. Our team of in-house GST experts at H&R Block can help you meet all the GST compliance requirements right from registration and filing of returns to handling notices.

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CA Chetan Shinde
CA Chetan Shinde
Chetan is the Lead Tax Advisor at H&R Block (India) with an experience of almost half a decade in audit and taxation. His professional areas of interest are GST advisory and statutory audit. Apart from taxation, he is passionate about social causes and works extensively towards rural school development and literacy.