Wednesday, 21 March 2018

GST in India - Advantages and Disadvantages

Hailed as one of the greatest tax betterment of the nation, the GST subsumes numerous indirect taxes which were forced by Center and State, for example, excise, VAT, and service tax. It is exacted on both products and services sold in the nation.

Any change will undoubtedly have merits and demerits. In this section, we will discuss both the merits and demerits of GST:
GEN GST Software Free Trial

Let us look at the advantages to start with:

Benefits of GST 

1. GST eliminates the cascading effect of tax 

GST is an extensive indirect tax that was intended to bring the indirect taxation under one umbrella. All the more essential, it will wipe out the cascading impact of a tax that was evident earlier.

Cascading tax impact can be best portrayed as 'Tax on Tax'. Give us a chance to take this example to understand what is Tax on Tax:

Before GST regime: 

An advisor selling services for say, Rs 50,000 and charged an service tax of 15% (Rs 50,000 * 15% = Rs 7,500).

At that point say, he would purchase office supplies for Rs. 20,000 paying 5% as VAT (Rs 20,000 *5% = Rs 1,000).

He needed to pay Rs 7,500 yield benefit charge without getting any conclusion of Rs 1,000 VAT effectively paid on stationery.

His aggregate outpouring is Rs 8,500.

Under GST

GST on service of Rs. 50,000 @ 18% 9,000
Less: GST on office supplies (Rs 20,000*5%) 1,000
Net GST to pay 8,000

2. Higher threshold for registration 

Prior, in the VAT structure, any business with a turnover of more than Rs 5 lakh (in many states) was obligated to pay VAT. If it's not too much trouble take note of that this cutoff contrasted state-wise. Likewise, benefit charge was exempted for specialist co-ops with a turnover of not as much as Rs 10 lakh.

Under GST administration, in any case, this edge has been expanded to Rs 20 lakh, which exempts numerous little dealers and specialist co-ops.

Let us look at this table below:

Tax Threshold Limits
Excise 1.5 crores
VAT 5 lakhs in most stats
Service Tax 10 Lakhs
GST 20 lakhs (10 lakhs for NE states)

3. Composition scheme for small businesses 

Under GST, independent ventures (with a turnover of Rs 20 to 75 lakh) can profit as it gives an alternative to bringing down expenses by using the Composition Scheme. This move has cut down the tax and consistency load on many small companies.

4. Simple and easy online method 

The whole procedure of GST (from registration to filling returns) is made on the web, and it is super simple. This has been helpful for new companies particularly, as they don't need to keep running from column to post to get distinctive enlistments, for example, VAT, excise, and service tax.

5. The number of compliances is lesser 

Earlier, there was VAT and service tax, every one of which had their own profits and compliances. Underneath table demonstrates the same:

Tax Return Filing
Excise Monthly
Service Tax
Company/LLP- Monthly
*Different for different states*
Some states require monthly returns over a threshold limit.
Some states like Karnataka require a monthly return.

Under GST, be that as it may, there is only one, brought together come back to be documented. Consequently, the quantity of profits to be ground has descended. There are around 11 returns under GST, out of which 4 are essential returns which apply to every single assessable individual under GST. The principle GSTR-1 is physically populated and GSTR-2 and GSTR-3 will be auto-populated.

6. Defined treatment for E-commerce operators 

Prior to GST regime, providing goods through online business segment was not characterized. It had variable VAT laws. Let us look at this example:

Online websites (like Flipkart and Amazon) conveying to Uttar Pradesh had to file a VAT declaration and the registration number of the conveyance truck. Tax specialists could here and there seize goods if the records were not created.

Once more, these online business brands were dealt with as facilitators or mediators by states like Kerala, Rajasthan, and West Bengal which did not expect them to enlist for VAT.

All these differential medications and confounding compliances have been evacuated under GST. Out of the blue, GST has plainly mapped out the arrangements appropriate to the web-based business area and since these are pertinent all finished India, there ought to be no intricacy with respect to the between state development of products any longer.

7. Enhanced effectiveness of logistics 

Earlier, the coordination business in India expected to keep up different stockrooms transversely finished states to avoid the present CST and state area charges on between state development. These appropriation Centers were constrained to work underneath their capacity, offering space to extended working costs.

Under GST, regardless, these repressions on between state advancement of stock have been reduced.

As a result of GST, distribution center administrators and web-based business aggregators players have demonstrated excitement for setting up their stockrooms at indispensable regions, for instance, Nagpur (which is the zero-mile city of India), instead of each other city on their movement course.

Diminishment in unnecessary collaborations costs is currently extending benefits for associations related to the supply of stock through transportation.

8. Unorganized sector is regulated under GST

In the pre-GST period, it was frequently observed that specific enterprises in India like development and material were to a great extent unregulated and chaotic.

Under GST, be that as it may, there are arrangements for online compliances and installments, and for benefiting of info credit just when the provider has acknowledged the sum. This has gotten responsibility and direction to these enterprises.

Give us now a chance to take a gander at hindrances of GST. If it's not too much trouble take note of that organizations need to defeat these hindrances to maintain the business easily.

Drawbacks of GST 

1. Expanded expenses because of software buy 

Organizations need to either refresh their current bookkeeping or ERP software to GST-consistent one or purchase a GST software with the goal that they can keep their business going. In any case, both the choices promptly expanded the cost of software buy and preparing of workers for a productive use of the new charging software.
SAG Infotech is the leading IT company in India to have launched a prepared to-utilize GST software called Gen GST Software. The product is currently accessible for free for SMEs, helping them progress to GST easily. It has really facilitated the agony of the general population in such a significant number of ways.

2. Being GST-consistent 

Small and medium-sized endeavors (SME) who have not yet marked for GST need to rapidly get a handle on the subtleties of the GST tax regime. They should issue GST-objection solicitations, be consistent with advanced record-keeping, and obviously, document convenient returns. This implies the GST-objection receipt issued must have compulsory subtle elements, for example, GSTIN, place of supply, HSN codes, and others.

3. GST will mean an expansion in operational expenses 

As we have officially settled that GST is changing the way how to assess is paid, organizations will now need to utilize charge experts to be GST-grumbling. This will continuously build costs for private ventures as they should bear the extra cost of enlisting specialists.

Additionally, organizations should prepare their workers in GST consistence, additionally expanding their overhead costs.

4. GST became effective amidst the money related year 

As GST was actualized on the first of July 2017, organizations took after the old expense structure for the initial 3 months (April, May, and June), and GST for whatever is left of the money the related year.

Organizations may think that it's difficult to get changed in accordance with the new expense administration, and some of them are running these duty frameworks parallelly, bringing about disarray and consistency issues.

5. GST is an online tax assessment framework 

Not at all like prior, organizations are presently changing from pen and paper invoicing and documenting to online return recording and making installments. This may be intense for some littler organizations to adjust to.

Cloud-based GST charging programming like the ClearTax GST Billing Software is unquestionably a response to this issue. The procedure for return recording on ClearTax GST is extremely basic. Entrepreneurs need to just transfer their solicitations, and the product will populate the arrival frames consequently with the data from the solicitations. Any mistakes in solicitations will be unmistakably distinguished by the product progressively, hence expanding proficiency and auspiciousness.

6. SMEs will have a higher tax rate 

Littler organizations, particularly in the assembling division will confront troubles under GST. Prior, just organizations whose turnover surpassed Rs 1.5 crore needed to pay extract obligation. Yet, now any business whose turnover surpasses Rs 20 lakh should pay GST.

Notwithstanding, SMEs with a turnover up to Rs 75 lakh can pick the organization plan and pay just 1% charge on the turnover in lieu of GST and appreciate lesser compliances. The catch, however, is these organizations will then not have the capacity to guarantee any information charge credit. The choice to pick between higher expenses or the creation plot (and in this manner no ITC) will be an intense one for some SMEs.


Change is unquestionably never simple. The administration is endeavoring to smoothen the street to GST. It is critical to take a leaf from worldwide economies that have executed GST before us, and who defeated the getting teeth inconveniences to encounter the benefits of having a brought together duty framework and simple information credits.

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