"Goods and Services Tax" is commonly referred to as GST. In India, this indirect tax has replaced a number of other indirect taxes like excise duty, value-added tax, services tax, etc. GST is applicable on both goods and services. Every single value addition is subject to a tax that is comprehensive, has multiple stages, and is depending on the destination of the goods.
The tax is collected at every point of sale under the GST system. Sales that take place within one state are subject to both central and state sales taxes.
Types of tax levied as GST
Under this system, there are three taxes that need to be paid: CGST, SGST, and IGST.
- CGST is the tax that the central government collects on a sale within a single state (for example, a transaction happening within West Bengal)
- SGST is the tax that the state government collects on a sale within the respective state (for example, a transaction happening within West Bengal)
- IGST is the tax that the central government collects on sales between states (for example, a transaction happening between West Bengal and Rajasthan)
Benefits of GST
- Hassle-free online processing
Taxpayers formerly struggled with different tax authorities under each tax code. While return submission was online, most assessment and refund procedures were offline. GST procedures are now mostly online. Registration, return filing, refunds, and e-way bill generating are done with a click. It has greatly simplified taxpayer compliance and eased business in India.
- Better logistics
Less paperwork is needed for products if there is only one indirect tax scheme. GST shortens the time it takes to move goods from one place to another and speeds up the supply chain and turnaround time. The GST e-way bill system gets rid of checkpoints between states, making it easier for goods to move between states and get to their final destination. It cuts down on logistics and storage costs.
- Better pricing, more consumption
GST led to more spending and more indirect tax money. Under the old system, taxes had a domino effect that made Indian goods more expensive than they were in other countries. Even between states, the difference in purchases was caused by the different VAT rates. Having uniform GST rates has made prices in India and around the world more competitive, which in turn increases the consumption of goods by buyers as well.
- No more cascading tax
The goal of the GST was to stop taxes from being added on top of each other. In the past, indirect tax laws made it so that taxpayers could not cancel out tax credits. Excise taxes paid during production could not be taken off the VAT that was paid during sale. Taxes cascaded. Only the net value added at each point in the supply chain is taxed by GST. This has stopped taxes from adding up and made it easier for goods and services to get input tax credits.
- Easier to start a business
With GST, starting a business is easier than ever. Now, start-ups no longer need to follow various tax regulations in each state where they operate. By registering for GST, new firms can conduct business anywhere in the country without difficulty. This also reduces the expensive fees necessitated by each state's unique tax regulations.
Pay your GST easily with a business loan
As GST has to be paid out every month, you may find your working capital fluctuating wildly once it is time to file your monthly returns and pay the taxes due. Give your working capital reserves a boost with a hassle-free online business loan. You can get funds up to Rs. 80 lakh with the Flexi facility that lets you borrow only what you need from your loan sanction, as and when you need it. As interest is charged only the amount you actively use, this leads to lower EMIs as well.
Additional Read: How To Calculate GST
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Disadvantages of GST in India
Increased compliance burden
Businesses, especially SMEs, face increased compliance requirements with multiple returns and strict deadlines, leading to higher administrative costs.
Complexity for small businesses
GST has introduced complexity with various tax rates and rules, making it difficult for small businesses to navigate without professional assistance.
Higher tax rates on certain goods
Some products and services have become more expensive due to higher GST rates compared to previous tax regimes, affecting consumer spending.
Technical glitches
The GST portal has faced technical issues, causing delays and frustration for taxpayers attempting to file returns or make payments.
Economic disruption
The initial implementation of GST caused economic disruptions, particularly for businesses unprepared for the new system, leading to temporary business slowdowns.
Inadequate training
Many businesses and tax professionals were not adequately trained on GST compliance, resulting in errors and penalties.
Overall, while GST aims to simplify the tax structure, its implementation has posed challenges for businesses and consumers alike.
The impact of GST is profound and affects different areas of the economy differently. Depending upon the sector you work in, GST has its own advantages and disadvantages. In the long run, we are looking at lower inventory costs that will benefit the economy on the whole.
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