One Year for GST - Pros and Cons

One Year for GST - Pros and Cons

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On July 1, 2018, Goods and Services Tax (otherwise known as GST) completed one year of its implementation. Its arrival took the country by storm even though many of the preceding years had been engulfed in discussions regarding the new tax system.

GST brought in developments and changed the way businesses conducted themselves. However, whether or not these developments were beneficial, is an entirely different story. So, we take a look at the various pros and cons that have emerged after GST’s one-year completion.

Pros:

#1 Inflation

One of the main apprehensions regarding GST’s implementation was that it would induce price inflation of goods. As a result, the real money in the hands of the consumers would decrease and affect savings. However, the regulations dictated that only 50 items were to be charged in the 28% tax slab. Additionally, even with the new tax regime, the total taxation levied on goods remained more or less the same as before on the majority of the products. As a result, the fear of price inflation was arrested to quite an extent.

#2 Development of E-Commerce Businesses

E-commerce sites like Flipkart, Snapdeal, and Amazon get orders from different cities and towns across the country. Now, the goods need to be delivered in different states. Previously, states used to charge certain taxes on their own merit and these tax percentages would vary from one state to another. As a result, the companies faced issues when reporting their taxes.

Not only the large enterprises but sellers in their marketplace too faced issues when they had to calculate different taxes for the same product. With the help of a single unified tax, these man-hours were reduced and the process has been eased in. As a result, GST aided the development of e-commerce businesses.

#3 Restricting Corruption in Unregulated Sector

The Indian economy is driven to a large extent by various unregulated sectors. Two industries which form part of this sector is a huge provider for the economy. These are textile and real-estate. By implementing a uniform tax code across the industries, GST has now been able to regulate these industries to quite an extent and bring the corruption under control.

Cons:

#1 Implementation Cost

In order to implement GST, companies needed to change how they reported taxes. Previously, the VAT had a different submission schedule, while the GST mandated companies to submit taxes more regularly. As a result, businesses that used to contract CAs and tax consultants only on the quarterly or annual basis, now needed to hire help for monthly GST returns.

Owing to that, the implementation cost of GST has started to weigh on the businesses. Similarly, now all businesses need to use computers to upload GST returns. The cost of maintaining computerised systems have further increased the expenses.

#2 Percentage of Tax Submission

While the GST collected in this one year has been over INR 90,000 crore, it does not necessarily represent a rise in tax submission. An interesting stat is that 69.5% of the registered GST users filed returns for March to April 30th of this year. However, an almost similar amount of returns had taxes amounting to very low figures or nil figures. As a result, this does not necessarily mean that GST has been able to increase tax submission rates.

#3 Tax Relaxation

As of now, there’s no news regarding tax holidays for any specific industries. Previously, tax holidays were offered to businesses operating in certain geographical location or industries to encourage commerce. However, with the new tax regime, no new tax holidays have been declared, leaving the businesses stranded.

Takeaway

The initial expectations for implementing GST were hinged on the creation of a single tax slab, which could have increased the prices on a majority of the products. However, the price increase was reflected on only a few of the industries. Additionally, the uniform code turned out to levy a similar amount of tax as before, keeping prices more or less the same. While unregulated sectors have been brought under the purview, putting a stop to corruption, the implementation cost and other cons still need to be addressed.

 

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