GST in India- Boon or Bane
GST stands for Goods and Service Tax is based on the consumption of goods and services in India. This particular tax is levied on all levels i.e. from manufacturing to the consumption of that product. In short, the burden of the tax value addition will fall upon the consumer. When GST came into a function it replaced several indirect taxes. Hence, it is the biggest tax reform in India since Independence is the goods and service tax (GST) and was introduced from July 1st, 2017. It removed the hassle of many taxes and made India one tax nation. The GST in India is one indirect tax that will be imposed all over the country.
Taxes under GST:
India is a federal nation and thus both Centre and State have their respective powers to levy the taxes. Therefore, there are two types of GST in India-
- Central GST (CGST)
- State GST (SGST)
The CGST is levied by the Central government whereas the SGST is levied by the State government. There is one more type of GST which Integrated GST. This tax is levied on the transaction made between states. This is levied by the Centre.
Existing taxes that were comprehended by GST: Several Central and State government taxes were subsumed under the GST-
Taxes under Centre:
- Central excise duty
- Duties of excise (medicinal and toilet preparations)
- Additional excise duties
- Textile products and textile (Additional customs duties)
- Additional excise duties (goods of special importance)
- Special additional duties of custom
- Service tax
- Central surcharges and Cesses
Taxes under State:
- State VAT
- Central sales tax
- Luxury tax
- Entertainment and amusement tax
- Entry tax
- Taxes on advertisements
- Taxes on lotteries, gambling, and betting
- Purchase tax
- State surcharges and Cesses
All these taxes later came under one head- GST.
There exists a GST council that comprises of a Chairman (Union Finance Minister), The Minister of State (revenue) and the State Taxation Minister who make the recommendation the following-
- The taxes, surcharges, and cesses which are levied by the Central Government, State Government, and the local bodies that may be comprehended under GST;
- The date on which GST will be levied on petroleum crude, high-speed diesel, natural gas, etc.
- Goods and services that are included and exempted from GST;
- Laws of governance regarding GST;
- Limit of tax exemption for goods and services;
- Rates at the time of urgency or a natural disaster;
- Special provisions for J&K, North-East states, Himachal, etc.
- Any and all matters concerning GST.
GST as Boon:
The benefits of GST for citizens, for trade, and for Government are listed below.
For citizens- The advantages of GST for citizens are:
- Simplified tax system.
- More employment opportunities.
- Same prices all over the country.
- Transparency in the taxation system.
- Due to the removal of surging, reduction in prices of goods and services.
For Trade- The benefits of GST for trade and industries are:
- Multiple taxes removed.
- Reduction in double taxation.
- Exports tax neutralized.
- The emergence of a unified market.
- Simple tax regime i.e. fewer rates and exemptions.
For Governments- The advantages of GST for Central and State government is as follows:
- The emergence of ‘make in India’.
- A boost in foreign investment.
- A unified common market for the entire nation.
- Encouraged manufacturing and export.
- More employment generation.
- Reduced poverty.
- A rise in GDP.
- Investment scenario improved.
- No multiple tax record keeping.
General Advantages of GST:
The one basic advantage of GST is that there is only one tax instead of multiple taxes. Some other advantages of GST introduction are-
- Earlier, many taxes were levied on the same product which ultimately leads to a price increase. The GST system eliminated the tax on tax effect.
- GST came up with the idea of HSN or Harmonized System of Nomenclature. This is an eight digit code to identify products on the basis of International Standards. There is no need for classifying the products.
- Instead of multiple taxes and several hidden taxes, there is only tax GST.
- GST reduces the cost of products because it is charged at the manufacturing cost and then collected at the sale, it will benefit the consumer. The reduction in prices will make consumers buy more of that product which is beneficial for the manufacturers. Therefore, it is a win-win.
- The tax filing system under GST is online and transparent.
GST as Bane:
Every coin has its flipside, so does the GST taxation system. Although, the introduction of this indirect tax brought about a lot of positive changes in the country and in the economy as a whole it also has some major limitations.
So, listed below are some key disadvantages of the GST in India-
- There are still people out there who are unclear about the whole concept ad process of GST. Initially, the government took some initiative in helping people understand it better but lately there is no such effort.
- As for small and medium enterprises, the GST is a burden. This is because in the previous taxation system the organization with a turnover of 1.5 crores was liable to pay excise duty. With the new GST regime businessman with a turnover capital of 20 lakhs and above will pay GST.
- The filing system of GST is online. It can be both good and bad. Some people still aren’t familiar with the technologies and thus they need the third party to do the filing. This has somewhat increased the costs of filing.
- One major and controversial drawback of GST is that it excludes petrol. If there is a unified taxation system, the petroleum should also be included.
- Frequent changes in tax slabs have been very complicated for small organizations because they increase the cost of operations.
- The businessman requires enrolling GST and therefore it increases the complexity of registering in several states. There should have been a centralized registration system for the same.
- GST has influenced the reward and discounts as well. Few companies have also eliminated reward systems because of their complexities with the new tax system.
- Banking and insurance are at higher rates than before which has also been an issue. Though the government aims at boosting this sector the policies prove otherwise.
- At the introduction of GST, the opposition party termed it as ‘disability tax’. This was due to its implementation on the products which were earlier tax-free.
- With the implementation of GST, the complexities for businessmen increased than ever before. They were forced to follow the laws imposed by the Government.
- The service tax was 15% but post the implementation of GST the rate is somewhere between 18-20%. Services like telecom, airline, and banking were affected significantly.
- The real-estate sector was greatly impacted by the GST. The cost of new houses increased by 8% after the GST was levied which resulted in the decline in the demand by around12%.
The emergence of GST as an indirect tax eliminated all kinds of previously established indirect taxes. The Central and State Government co-work to make it a better taxation system. Similar to every new development GST also has its positive and negative aspects. However, it totally depends on the perceiver as to what he wants to see. Mentioned above are the advantages and disadvantages of the GST system in India. It might help in getting a better insight into the working of GST and thus decide whether it is a BOON or a BANE!