GST : pros and cons


1.    Removing Cascading Tax Effect
A significant benefit of Goods and Services Tax is removal of cascading tax effect. In simple words, it means a tax on tax. Earlier, CVD, SAD, Service Tax, Education Cess and other additional customs duties were charged apart from Basic Customs Duty (BCD) on goods imported into India from other countries in the world. Now these duties have been subsumed and calculation of customs duty involves rates of Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST), Compensation Cess and other applicable duties.

2.    Higher Threshold under GST
Businesses with annual turnover of INR 20 lakh in India are exempted from the GST. For hilly and north-eastern states, this limit has been INR 10 lakh. Before GST, this limit was INR 10 lakh for entire country and INR 5 lakh for hilly and north-eastern states. What is GST rate of your product? Know here: GST Rate List Product Wise.

3.    Easier Online Procedure
The entire GST process starting from registration to filling returns plus payment of GST tax is taken place on World Wide Web. Now start-ups don’t have to run up around tax offices for doing formalities regarding registration process.

4.    Boost Efficiency in Logistics
Before GST, logistic companies had to maintain multiple warehouses across the states to avoid CST and state entry taxes while moving products from one state to another or any international territory. Most of the times, these warehouses were forced to operate below their capacity and thus their operating costs forced to rise. But after GST implementation, the restrictions of goods being moving from one state to another or international territory have become lessened. And many e-commerce players are planning to set up their own warehouses in strategic locations
5.    Regulation of Unorganized Sector
Certain industries in India like textile and construction, which were unregulated and unorganized earlier, will now be treated to avail input credit. This facility is provided only when the supplier has accepted the amount, thereby bringing accountability & regulation of these sectors.
Experts have also identified some disadvantages of GST implementation, which would cause a worry for some industries. Let’s discuss them.

6. GST will also help to build a transparent and corruption free tax administration.
Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.
GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.
GST also has an optional scheme of lower taxes for small businesses with turnover between INR 20 to 50 lakhs. It is called the composition scheme. It has now been proposed to be increased to 75 lakhs. This will bring respite from tax burdens to many small businesses.
Removing cascading tax effect, simpler online procedure under GST, defined treatment for E-commerce and regulating the unorganised sector.


Experts have also identified some disadvantages of GST implementation, which would cause a worry for some industries. Let’s discuss them.

1.    Change in Business Software
Most businesses were working on accounting software or ERPs for filling tax returns, configured with VAT, excise and service tax earlier. However, now under GST regime, they have to modify their software and upgrade it with new GST-compliant software. This leads to rise in cost of purchasing this software and giving special training to their employees for working on it.

2.    Rise in Operational Costs
Most small businesses in India had to file returns on their own to save costs and were not able to hire tax professionals. After GST implementation, they require to have skilled people who can give them professional assistance for filling returns under new tax system.

3.    Web Procedure
Many small businesses are not tech-savvy in India and so they are finding difficulty in filling returns under GST as entire process of this tax system runs online only. Even as rest of the nation gets ready to go digital, but businesses in small cities across the country face a huge technology problem.

4.    Disruption to Some Industries
Some experts say impact of GST has been showing negatively in the real estate market. Even cloth merchants and drug shops are not happy with this new tax regime in India. Now we need to see both positive and negative impact of GST on different industries.
Under GST regime in India, businesses will experience larger competition in 2017. Certainly, this one tax policy has simplified the collection of customs duties from importers and exporters. However, market analysts have also identified few disadvantages in which there are worries for some industries.

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